Key points of investment
The revenue contribution of the photovoltaic business is currently showing prominence and is now flourishing. The company achieved operating revenue of about HK$403 million in fiscal year 2016, an increase of 58% over the previous year (2015: about HK$255 million). Among them, the revenue from the old restaurant operating business was basically the same, while the revenue from the photovoltaic business went from nothing, achieving revenue of about HK$138 million. The increase in revenue was mainly due to the photovoltaic business carried out in the fourth quarter. Net profit attributable to shareholders increased substantially, from HK$0.54 million to HK$5.08 million, an increase of more than eight times. The main incremental contribution also came from the photovoltaic business. EPS was 1.27 HK cents, and the company did not pay dividends in fiscal year 2016.
Orders are full, and revenue from the PV business will continue to explode. The order size of Tongjing Renewable Energy has increased significantly in the past two years: the total order size in 2015 was 150 MW, the total expected order size in FY2016 exceeded 2 GW, and the expected order size in FY2017 exceeded 4 GW. Orders are mainly from important domestic customers and strategic partners including China Power Investment, Xinyi Solar Energy, Datong Coal, and Foster. The sales price of the company's tracking system is 1.3-1.4 yuan/watt, gross margin is in the 30-40% range, net interest is between 23-35%, and profitability is excellent. Full orders for sales of EPC and tracking systems ensure that the company's revenue will continue to explode over the next 2 years, providing the core impetus for the company's growth.
Self-built power plants are progressing smoothly, and the installation targets are remarkable. The construction and operation of its own power plants is another major layout point for the development of the company's photovoltaic business. It is also the strategic focus of the company's long-term development. As of March 31, 2016, the installed capacity of the company's grid-connected power plant was 6MW. The estimated self-built capacity will reach 400MW from April 2016 to April 2017, while the installed target for 2017-2018 is 1 GW. All of the company's power plants are located in southern unrestricted electricity regions such as Zhejiang and Anhui. The gross margin is expected to be 50-60%, and the net interest rate is 35-40%.
Our view: Tongjing New Energy is a leading provider and manufacturer of solar tracking and support system solutions in China, and is also actively developing and operating downstream photovoltaic power plants. The company's products have unique competitive advantages in agricultural and optical complementary projects, are favored by the market, and have strong and diverse customer resources. The company is currently full of orders, and its installation targets are impressive, and it has the potential to explode in performance over the next 1-2 years. Excluding the company's restaurant business revenue, the company's PV business revenue for fiscal year 2016 was HK$138 million. It is estimated that the next fiscal year's PV business revenue will exceed HK$3 billion, mainly EPC and bracket sales. Net profit is around HK$500 million. Performance has exploded year-on-year. We recommend investors pay close attention.
Risk warning: The company's order completion progress fell short of expectations, and the power plant construction progress fell short of expectations.