Events:
The company's operating income in 2015 was 3.079 billion yuan, a year-on-year growth rate of 30.49%; the net profit belonging to shareholders of listed companies was 6.37 million yuan, an increase of 111.37% over the same period last year; and the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 3.82 million yuan, a year-on-year growth rate of 106.56%; basic earnings per share was 0.027 yuan per share. The company decided to issue a cash dividend of 0.4 yuan for every 10 shares.
Viewpoint:
The company's performance turned from deficit to profit. In 2015, the company achieved operating income of 3.079 billion yuan, an increase of 30.49% over 2014. In 2015, the company made a net profit of 6.37 million yuan, compared with a loss of 56 million yuan in 2014, turning losses into profits, and net profit increased by 106.56%. Due to the sluggish consumer demand downstream, the copper tube consumer terminal market shrank in 2015, copper tube processing orders for the whole year decreased significantly, the company achieved a substantial increase in operating income in the depressed economic situation, and the main reasons for turning losses into profits are:
1. Sales of foreign trade products increased significantly. In 2015, in the face of fierce competition in the copper processing market, falling prices and declining gross profit margin, the company optimized its business structure and greatly increased the production of trade products. While revenue from the copper processing industry dropped from 2.153 billion yuan in 2014 to 2.027 billion yuan, down 5.86 percent, revenue from trade products soared from 145 million yuan to 1.032 billion yuan, a range of 610.7 percent, increasing the company's operating income by 30.49 percent.
two。 Dispose of non-performing assets. In 2015, the company transferred its 100% stake in Guangdong Guanbang Technology Co., Ltd., a wholly-owned subsidiary, to Kenna Real Estate at a price of 85 million yuan. The daily net assets of the company are 78.29 million yuan, the net profit from the beginning of the period to the disposal day is-3.53 million yuan, and the net profit in 2014 is-4.67 million yuan. Guanbang Technology's main business is the production and sales of metal processing equipment. According to the slowing market situation of the demand for metal processing equipment and the depressed operating performance of Guanbang science and technology, the company predicts that it will be difficult to improve the scientific and technological performance of Guanbang in the short term. The sale of Guanbang Technology will help the company to integrate its operating resources, invigorate its assets, reduce operating costs, and further optimize its industrial structure and business structure.
3. Funds for the issuance of additional shares have been put in place. The company privately issued 36800000 RMB common shares to the specific target Beijing Hongyuan Chuangjia Holdings Co., Ltd., with a par value of 1 yuan per share and an issue price of 7.20 yuan per share. The net amount of funds actually raised was 261602333.40 yuan. Of this amount, 210 million yuan is used to repay bank loans and 51.6023 million yuan is used to replenish working capital. According to the 2015 annual report, the company's short-term liabilities decreased from 419 million yuan to 102 million yuan, and interest expenses in financial expenses decreased from 46.82 million yuan to 32.98 million yuan. Through additional issuance, the company reduces the debt ratio, saves financial costs, increases net assets, and provides financial support for industrial upgrading and company development.
4. Strengthen customer payback and internal control. The company's accounts receivable decreased from 296 million yuan to 147 million yuan, and the corresponding monetary funds increased from 36 million yuan to 149 million yuan, indicating that the company will strengthen internal payback and speed up capital turnover. On the other hand, the company reduces sales and management expenses by strengthening internal management. In 2015, the company's sales expenses decreased from 18.01 million yuan to 14.98 million yuan, and management expenses decreased from 64.93 million yuan to 51.76 million yuan.
Equity incentive plan. Through the equity incentive scheme, the company plans to grant 36 senior executives, middle managers and backbones a total of 3 million restricted shares at the price of 7 yuan per share, requiring the company to achieve a certain performance before it can be unlocked. At present, the assessment target of 40% share unlocking in the first stage and the company's profit of 3 million yuan in 2015 has been achieved, while the remaining two batches of unlocking targets are 3.6 million yuan and 3.9 million yuan respectively. The incentive cost of restricted stock will be amortized in corresponding years, with amortization expenses of 851800 yuan, 9.6872 million yuan, 3.6195 million yuan and 1.3585 million yuan from 2015 to 2018, which will raise the threshold for unlocking and urge management to make every effort to improve business performance and seek the transformation and upgrading of the company.
Conclusion:
Based on the copper processing industry, the company has successfully developed new markets in trading products; the company's operating expenses have been effectively controlled; and the equity incentive plan closely combines senior executives with the interests of the company. We estimate that the EPS of the company from 2016 to 2018 is 0.17,0.24 and 0.33 yuan per share respectively, corresponding to 90X, 62x and 45x respectively. Cover for the first time, giving the company a "recommended" investment rating.
Risk Tips:
1. Excessive competition in copper processing industry
two。 Inventory price risk.