This report is read as follows:
The company's traditional main casting and forging business basically bottomed out, and major shareholders and employees plan to subscribe to increase and expand the production capacity of the new material business, which is expected to solve the bottleneck of the new material business and bring about an outbreak of performance.
Main points of investment:
For the first time, the "overweight" rating was given, with a target price of 18.58 yuan. The company's traditional main casting and forging business has been relatively fully recognized by the market due to the impact of macroeconomic and industry recession, and is currently at the bottom. The previously invested new materials business has not contributed to the company's performance for the time being due to supplier factors, but we believe that the major shareholders and employees' stock ownership plans to subscribe for and expand the production capacity of the new materials business is expected to solve the bottleneck of the new materials business. resulting in an explosion of corporate performance. We predict that the EPS of Baoding Science and Technology from 2016 to 2018 will be 0.12, 0.27, 0.65 yuan respectively, and give the target price 18.58 yuan, "overweight" rating.
The recession of traditional business has been relatively fully expected by the market. According to the company's announcement, the net profit of returning home in 2015 was about 4.29 million yuan, down about 69 percent from the same period last year. The loss in the first quarter of 2016 is expected to be 12 million yuan to 15 million yuan. We believe that the sluggish market of casting and forging in the company's traditional business has been relatively fully expected by the market and is currently at the bottom. With the macroeconomic temporary stability, and even ushered in a small cycle of recovery, forging casting business has little room for a sharp decline.
New materials business is expected to increase production capacity and other ways to solve business bottlenecks. In June 2015, the company announced the acquisition of 100% equity interest in Shanghai Fuyu New material Technology Co., Ltd. ("Shanghai Fuyu") with self-raised funds of 360 million yuan to expand the fields of new materials, new energy, chemical industry and environmental protection technology. In 2015, due to environmental issues affecting the production of Shanghai Fuyu suppliers, their sales fell short of expectations, thus failing to achieve the annual performance commitment of 20 million yuan in net profit. We believe that the unfulfilled performance commitment in 2015 is mainly due to supplier factors, with the increase in major shareholder and employee stock ownership plans and Shanghai Fuyuyuan shareholders' subscription, plus investment in Fuyu subsidiary's annual production of 5000 tons of catalyst project. the performance of emerging industries is expected to break out.
Core risks: the macroeconomic decline is higher than expected; the progress of new materials projects is lower than expected.
Catalyst: Shanghai compound elm capacity release.
