Main points of investment

Event: the company publishes its annual results report for 2015. According to the company's annual report for 2015, the company's operating income in 2015 was 1.386 billion yuan, up 11.99 percent from the same period last year; the net profit belonging to shareholders of listed companies was 56 million yuan, up 22.32 percent from the same period last year; EPS was 0.19 yuan, up 26.67 percent from the same period last year. Q4 realized operating income of 290 million yuan, down 13.11% from the same period last year; net profit belonging to shareholders of listed companies was 4 million yuan, down 21.87% from the same period last year.

The steady growth of main income comes from the growth of export market on the one hand and the rapid growth of brake disc business on the other. In the past 15 years, the company's exports totaled 896 million yuan, an increase of 21.44% over the same period last year, accounting for 64.64% of the company's revenue. The company's overseas market is mainly concentrated in the after-sales service market, which is relatively stable and is not affected by economic fluctuations. The company develops new markets, cultivates new customers and increases orders by strengthening communication with customers. At the same time, the company actively develops its own brand passenger car enterprise customers, which makes the brake disc business grow rapidly, which in turn drives the growth of the main business income. In the past 15 years, the operating income of the company's brake disc was 1.029 billion yuan, an increase of 32.59% over the same period last year.

Gross profit margin for the whole year was under pressure, and profitability recovered in the fourth quarter. 1) the 15-year gross profit margin was 16.55%, a decrease of 1.37 percentage points over the same period last year; Q4 gross profit margin was 18.41%, an increase of 1.50 percentage points over the same period last year. 15 years of gross profit pressure is mainly due to the serious decline in vehicle sales in the second and third quarters, the whole car factory depressed the price of parts manufacturers in order to ensure the profit level. The increase in Q4 gross profit margin is mainly due to the recovery of vehicle sales in the fourth quarter and a reduction in price reduction. 2) the 15-year net interest rate is 3.82%, an increase of 0.23% over the same period last year; and the net interest rate of Q4 is 1.10%, an increase of 0.23% over the same period last year. The increase in the net interest rate is mainly due to the reduction in the expense rate during the period. The expense rate during the 15-year period was 11.39%, a decrease of 2.2 percentage points over the same period last year; and the expense rate during the Q4 period was 14.56%, a decrease of 0.78 percentage points over the same period last year.

The financial expense rate decreased significantly in the past 15 years, and the sales expense rate increased significantly in the fourth quarter. 1) the 15-year financial expense rate was 0.25%, down 2.10% from the same period last year; the Q4 financial expense rate was 0.16%, down 2.36% from the same period last year, mainly due to the increase in the company's exchange earnings and the reduction of borrowing interest due to the sharp depreciation of the RMB since the third quarter. 2) the 15-year sales expense rate was 6.18%, a decrease of 0.22% over the same period last year; the Q4 sales expense rate was 8.48%, an increase of 0.54% over the same period last year, and a significant increase of 3.03% compared with the previous year. It is mainly due to the increase in channel construction costs brought about by the launch of the company's new brake clamp body business.

The gradual increase of brake pliers in 16 years will improve the profitability. The company's "annual production of 800000 sets of brake pliers project" was officially put into production in the middle of 15 years. The products are mainly supplied to the high-end markets in Europe and the United States, and the commissioning of the project will further improve the company's existing product variety, so that the company basically has the production conditions of brake assembly, so as to meet the one-stop purchasing needs of overseas customers and major domestic automobile factories. At the same time, because of its complex process and high technical content, compared with traditional products, it has higher added value and gross profit margin, so it will become a new profit growth point of the company, and then enhance the core competitiveness and profit level of the company.

Participate in Shanghai Che Yi, set up an industrial investment company, and actively lay out the automobile aftermarket. The company currently holds a 37.09% stake in Che Yi, and in the first half of 15 years, Che Yi strengthened its auto parts warehousing and logistics business. With the help of auto parts B2B platform and warehousing logistics system of Che Yi information, the company's brake parts products will accelerate to enter the domestic after-sales service market. In order to further speed up the entry of products into the international OEM and domestic joint venture brand market, enrich the company's product line, and realize the technology and production capacity transfer to high-end automotive brake components; at the same time, integrate and acquire automotive market resources, the company jointly established Longji Dongyuan Investment Company. In the future, the automotive aftermarket will become a new profit growth point for the company.

Profit forecast and investment advice: we maintain the original forecast, that is, the company's operating income from 2016 to 2018 is 1.661 billion yuan, 1.997 billion yuan and 2.371 billion yuan respectively, and the return net profit is 80 million yuan, 116 million yuan and 157 million yuan respectively, and the corresponding EPS is 0.23,0.33 yuan and 0.42 yuan respectively. Considering that the company is the key target of Internet + automobile aftermarket, after the establishment of the Industrial Investment Company, the company will carry out extensive mergers and acquisitions in the future, giving the company a partial valuation premium, but taking into account the current overall market and the sharp decline in the valuation level of comparable companies, we reduce the target price of Longji Machinery to 18 yuan to maintain the "overweight" rating.