Main points of investment
Revenue and cost tend to stabilize: revenue in the third quarter is 653 million yuan, down 2.88% from the same period last year, and the company's operating income is gradually stabilizing after a sharp decline in the first quarter (revenue in the first quarter and second quarter fell by 31.52% and 9.28% respectively compared with the same period last year). The solar water heater industry is also in a stable state after a period of fierce competition, with a gross profit margin of 35.57% in the third quarter, which has remained at about 35% in recent years.
The growth of sales expenses is slow but still high: the company's net profit in the third quarter was 74 million yuan, up 126.85% from the previous quarter. Channel expansion sales enterprises + the promotion of new products to maintain a high level of sales expenses, the third quarter sales expenses of 141 million yuan, sales expense rate of 21.57%, an increase of 7.9PCT compared with the same period last year, but reduced 8.8PCT. We believe that although the slowdown in the growth of sales expenses has improved the company's profitability, sales expenses will remain at a high level in the short term.
Sufficient cash reserves provide strong extension expectations: the company currently has cash and other current assets totaling about 2.4 billion yuan, providing adequate protection for future investment and business expansion. The company announced on October 28 that it will increase its investment in Tibet by 100 million yuan, which is owned by Shanghai Haojing Investment Co., Ltd. (registered capital of 200 million yuan), and further expand its investment business in Tibet.
Benefit from Guotai Junan's primary market background resources: establish Shanghai Guotai Junan Haojing Investment Co., Ltd with Shanghai Shipping Industry Fund and other companies. Shanghai Shipping Industry Fund, a major shareholder of the investment company, is Guotai Junan's core capital management and investment platform, with Chairman Guotai Junan as its chairman. It is expected that the company will directly benefit from Guotai Junan's project resources and investment management capabilities in the primary market, and further enhance the scope of the company's extension expansion by virtue of the advantage of funds on hand to facilitate diversification and transformation.
Profit forecast and valuation: from 2015 to 2017, we forecast net profit of 1.96,2.11,263 million yuan and EPS0.25, 0.26,0.33 yuan, corresponding to PE41.44, 39.85,31.39 times. Actively value the company's transformation determination and results, and maintain the "buy" rating.
Risk tips: product sales are lower than expected and the decline in the solar hot water industry is lower than expected.