Brief comment on performance
On August 18, the company released its mid-2016 report. During the reporting period, the company's main business income was 375 million yuan, an increase of 106.28% over the same period last year; it realized a net profit of 43.9268 million yuan, turning losses into profits; and EPS0.22 yuan per share.
Business analysis
The company made a net profit of 43.9268 million yuan in the first half of the year, surpassing the annual performance of 36.93 million yuan in 2015. we expect the year-on-year growth of more than 150% in 2016, and the net profit is expected to reach 100 million yuan, the highest in history. In addition, due to the increase in the proportion of UHV products, the low price of raw materials and the company's cost reduction and efficiency, the company's gross profit margin for suspension insulators reached 44.19% in the first half of the year, far exceeding the level of 36.2% in the same period last year.
The maximum target of UHV elasticity has finally been proved: we pointed out in our company depth report in July 2015 and previous industry reports that combining the structural characteristics of AC and DC UHV, as well as the company's market position, we believe that the company is the largest target of UHV elasticity. With "Mengxi-Tianjin South 1000kV", "Hengyu-Weifang 1000kV", "North Shanxi-Nanjing ±800kV" and other UHV enter the delivery date at the same time, the company finally ushered in a bumper harvest in 2016. At the same time, in the first half of 2016, the company achieved good results in bidding activities such as "Hengyu-Weifang 1000kV", "Ximeng-Taizhou ±800kV" and "Shanghai Miao-Linyi ±800kV", with a total order of more than 220 million yuan. In the second half of 2016, the company is expected to continue to win a large number of orders in "Changji-Guquan ±1100kV", "Zarut-Qingzhou ±800kV" and subsequent new projects.
Benefiting from Belt and Road Initiative, overseas orders grew rapidly: in the first half of the year, the company's export business achieved revenue of 86.73 million yuan, an increase of 87.6% over the same period last year, and a 5.64% increase in gross profit margin.
Benefit from the accelerated construction of the distribution network and the completion of production expansion ahead of schedule: with the completion of the production expansion of Fujian subsidiaries in 2015, the company's market competitiveness in middle and low-end products has been strengthened, and the gross profit margin has been improved. However, due to the increasingly fierce competition in the composite insulator market, the gross profit margin has declined significantly. In addition, the company has developed composite bar products for electrified railways to lay a solid foundation for the company to enter the electrified railway market and maintain a high level of ultra-high pressure: according to our judgment, the prosperity of the industry will reach a high point in 2016 and will last for about 3 years, and whether it can be sustained depends on the breakthrough of the global energy Internet.
Profit forecast and investment suggestion
We judge that the EPS of the company from 2016 to 2018 is 0.47, 0.53, 0.56, corresponding to the stock price of 49x/43x/41x PE on August 18, maintaining the "overweight" rating.