Main points of investment:
Event: on the evening of July 13, 2017, the company issued a semi-annual performance forecast for 2017. The net profit of the company in the first half of 2017 was 2700-32 million yuan, an increase of 1055.48% 1269.45% over the same period last year. The main reasons for the changes in performance are: (1) year-on-year increase in product sales, year-on-year increase in aluminum price and significant increase in sales revenue; (2) increase in output and yield, product gross profit margin has increased significantly; (3) important R & D projects have been accepted and government subsidies have been obtained, and profits have been thickened accordingly.
Comments:
Civil, military materials and 3D printing three major business layout. The company is mainly engaged in the research, production and sales of aluminum alloy heat transfer materials and polymetallic composite materials, and the products are widely used in automotive, electric power, construction machinery, home appliances and other fields. The company participated in the establishment of Fei'erkang to enter the field of 3D printing in 2012, the field of military materials in 2014, and the establishment of an industrial M & A fund in 2016, currently forming three major business patterns: civilian materials, military materials and 3D printing.
Military materials business: complete all qualification certification, continue to open up the military market. Since the company has set foot in the field of military products, it is gradually improving its layout. In 2014, we signed a low-cost armored aluminum alloy plate production contract and strategic agreement with the Chinese military material Research Institute. In 2015, it provided technical advice to China Shipbuilding heavy Industry 702 to support product upgrading. In 2016, the company further expanded the market and made achievements: it won the bid for a certain type of aluminum alloy sheet of the Chinese military Science Research Institute, and signed a "Strategic Cooperation Agreement" with Nanjing University of Science and Technology Institute of Mechanical Engineering, including the research and development of composite protective materials. Won the Silver Award and the highest score in the first China dual-use Technology Innovation and Application Competition. In addition, the company turned Yinbang Defense into a wholly-owned subsidiary through equity transfer.
As the company completes all relevant qualification certification and becomes a formal military R & D and production enterprise, it will take Yinbang Defense as the main platform to continue to promote the development of military-related business.
Civil materials business: hope to continue to benefit from capacity release + gross profit margin and operating efficiency improvement. The company's civil materials products are mainly customized according to different customer specifications and quality standards, production and sales industry ranks in the forefront, with a high reputation. In 2016, the company's IPO investment project has released production capacity, with an annual capacity of 200000 tons, up from 75000 tons before the listing. At the same time, with the improvement of product structure and the overall management level of the company, the gross profit margin and daily operation efficiency of products are expected to improve in the future. In the future, the company's performance related to civil materials is expected to continue to benefit from the release of production capacity and the improvement of operating efficiency.
3D printing business: the products meet the aviation standards and are optimistic about the broad market for sharing large aircraft. The company's subsidiary Fei Erkang (currently 45%) can provide customers with a full set of 3D printing solutions, and is the only titanium alloy powder company in China that can produce titanium alloy powder in large quantities to meet aviation standards. At present, its titanium alloy powder has passed the civil aviation qualification certification and is used in civil aircraft; at the same time, in cooperation with Comac on the C919, 3D printing titanium alloy parts have successfully passed the international airworthiness certification and are used in civil aircraft. The total number of orders for the C919 is 600, and the company's 3D-related business is expected to get a share of China's civil aircraft market, according to the people's Daily online.
Complete two periods of employee stock ownership and be optimistic about encouraging the company's long-term development. The company completed the first phase of the employee stock ownership plan in 2016, and the cumulative number of shares bought by the company accounted for 0.9741% of the total share capital. On the evening of June 21, 2017, the company announced that it had completed the second phase of the employee stock ownership plan (buying 18083012 shares of the company, accounting for 2.20% of the company's total share capital, with an average purchase price of 8.898 yuan). We expect that the employee stock ownership plan will form a long-term and effective incentive and restraint mechanism, fully mobilize the enthusiasm and creativity of employees, and better promote the long-term and stable development of the company in the future.
Profit forecast and investment advice. It is estimated that the company's EPS from 2017 to 2019 will be 0.25,0.37,0.49 yuan respectively. Considering the scarcity of the company's military business and enjoying a certain valuation premium, the company will be given a buy rating of 48 times PE in 2017, with a target price of 12.00 yuan.
Risk hint. (1) the market expansion of military materials is not as expected; (2) the cost control of aluminum materials is not as expected.