Event: the company released its semi-annual report on July 21. 2017H1 achieved 181 million yuan in revenue, an increase of 44.07% over the same period last year, and a net profit of-9.68 million, down 188.04% from the same period last year.
Benefiting from the recovery of downstream mining, cement and other industries, the revenue of wear-resistant materials has increased significantly: 2017H1 achieved an income of 181 million yuan, an increase of 44.07% over the same period last year. In terms of downstream industries, the income of the cement industry was 73.73 million yuan, an increase of 12.36% over the same period last year; the income of the mining industry was 62.47 million yuan, an increase of 84.14% over the same period last year, with the largest increase; and the income of other industries was 43.39 million yuan, an increase of 69.69% over the same period last year.
Thus it can be seen that the rising demand of downstream mining and cement industry is the main reason for the company's income.
In terms of products, high chromium ball income is 154 million yuan, which is the company's main product, an increase of 44.71% over the same period last year; extra-high chromium ball revenue is 6.88 million yuan, down 50.78% from the same period last year; and revenue from other products is 18.65 million yuan, an increase of 298.23% over the same period last year.
The rising cost side has led to a decline in gross profit, and the company's profit has not yet improved: although the downstream mining and cement industries have recovered and the demand for wear-resistant materials has also improved, the price of the company's products has not been effectively transmitted, resulting in a decline in the company's gross profit margin from 19.43% in 16 years to 14.10% of 17H1. In terms of period expenses, the sales expenses were 22.7 million yuan, an increase of 52.23% over the same period last year, the management expenses were 16.95 million yuan, an increase of 3.72% over the same period last year, and the financial expenses were 17.99 million units, down 35.47% from the same period last year. The 2017H1 net profit of the company is-9.68 million yuan, but the profit has not improved yet.
Proposed acquisition of majestic Seiko cut into the field of auto parts, pay attention to the progress of additional issuance: the company plans to raise 1.1 billion to acquire Wuxi majestic Seiko, with a consideration of 1.287 billion yuan. Majestic Seiko specializes in automobile stamping parts and stamping dies, which focus on seat parts and body accessories of auto body system. Customers cover Yanfeng Johnson, Foggia, Boze, Takata, Magna, Autoliff and other world-renowned auto parts suppliers. In 2016, Xiongwei Seiko had an income of 826 million yuan, a net profit of 154 million and a gross profit margin of 33.33%. The counterparty promises that the net profit in 2016 and 2017 will not be less than 115 million and 125 million, and the cumulative net profit from 2016 to 2018 will not be less than 375 million.
Profit forecast and investment advice: excluding majestic Seiko, the company's EPS in 2017-2019 is expected to be-0.09,0.11,0.33 yuan. Considering the company's leading position in the field of wear-resistant materials and the proposed acquisition of majestic Seiko, the company was given a "overweight" rating for the first time.
Risk hint: the progress of additional issuance is not as expected, and the business of wear-resistant materials continues to decline.