Main points of investment
Event: on July 13, 2017, the company announced its semi-annual performance forecast for 2017, which is expected to achieve a net profit of 94.37 million yuan to 101.92 million yuan, an increase of 275% over the same period last year.
Short-term performance pressure, AP1000 grid-connected power generation is good for the company. In 2016, the parent company realized revenue of 256 million yuan, an increase of 18.22% over the same period last year, and a net profit loss of 52 million yuan, reducing the loss by 33 million yuan. As nuclear power has not been approved since 2016, the short-term performance of the parent company is under great pressure. However, on July 12, all the tests of Marine Nuclear Power Unit 1 were completed and officially entered the loading preparation stage. It is expected that the power generation will be connected to the grid in the fourth quarter, which is expected to bring centralized approval of nuclear power. We are optimistic about the company's ability to take orders in the field of nuclear power HVAC.
ZTE equipment orders have decreased, and we still need to pay close attention to the implementation of the contract. ZTE equipment 2015-2018 deduction of non-return net profit performance commitment is: 1.41max 1.62max 1.90pm 238 million, slightly exceeding the performance commitment in 2016. In the first half of this year, affected by factors such as the macro-economy, the steel market, and the slowdown in procurement demand from upstream customers, ZTE equipment and energy engineering special pipe fittings business orders decreased, contract execution slowed, and product gross margins declined. however, downstream demand is generally stronger in the second half of the year than in the first half of the year, and we still need to pay close attention to the newly signed orders and implementation.
The compensation for demolition reached 150 million yuan before tax, greatly thickening the company's performance. In order to make rational and comprehensive use of the land in the core area of the Guangdong-Guangxi-Guizhou high-speed railway economic cooperation test area, the old factory land, buildings and their attachments of the company's "Sanmaogang" and "Qiudonggang" old factory buildings located in Tangtou Village Committee, Shishan Town, Nanhai District, Foshan City, Guangdong Province, have been included in the scope of government demolition. In July 2016, the company signed a land expropriation and demolition compensation agreement with the Luocun workstation of the demolition office, and is expected to earn a pre-tax profit of about 150 million yuan. After deducting the net loss of asset disposal and related taxes and fees, the recognized after-tax profit is about 20 million lower than expected, and government subsidies will greatly increase the company's performance.
Profit forecast and rating: the company is the leader in the HAVC industry of nuclear power. Benefiting from civil-military integration and approval of nuclear power, it is expected to obtain a large number of nuclear power orders in the future. Considering the confirmation of demolition compensation in 2017, the company's EPS in 17-19 is expected to be 0.45 / 0.36 / 0.52 yuan respectively, maintaining the "overweight" rating.
Risk hint: the risk of failure of 3D industrialization and the development of nuclear power are lower than expected.
