Description of the event

On July 4, 2016, Tianshun Co., Ltd. released its 2016 semi-annual performance forecast. It is expected to achieve net profit attributable to 1360-14.9 million yuan, an increase of 5%-15% over the previous year.

Incident comments

Government subsidies contributed to a steady increase in net profit. According to the performance forecast, Tianshun Co., Ltd. achieved net profit of 1360-14.9 million yuan in the first half of 2016, an increase of 5%-15% over the previous year. Affected by weak macroeconomics and low demand for commodities, the company's main business revenue grew slowly. The main reasons for the increase in the company's net profit in the first half of the year were: 1) receiving government subsidies in the first half of the year, which led to a year-on-year increase in non-operating income; 2) the decrease in corporate loans compared to the same period last year and the decline in loan interest rates, which led to a large year-on-year decline in financial expenses.

For the first time, an “increase in holdings” rating was given. Tianshun Co., Ltd. is a comprehensive third-party logistics leader in Xinjiang. It is based on the logistics of bulk materials and bulky goods, and has expanded into businesses such as supply chain management, logistics park management, and logistics finance supervision. The company's business model combining heavy assets is becoming more mature and highly replicable; at the same time, the company's layout of the important economic hubs in Xinjiang, with obvious geographical advantages, will fully benefit from the Belt and Road policy. The company's 2016-2018 EPS is expected to be 0.53 yuan, 0.57 yuan and 0.68 yuan respectively, giving it an “increase in holdings” rating for the first time.

Risk warning: continued slump in commodity demand, receivables risk, risk of default by outsourcers