Main points of investment:
The core competitiveness of the chemical industry of the integrated circular industry chain foundry company, and the recovery of the industry prosperity contributes to the high growth of the company's traditional main business performance. The company is a leading enterprise in chlor-alkali industry in Inner Mongolia.
1) relying on the integrated circular economy industry chain of "coal-electricity-chlor-alkali chemical industry" and "coal-electricity-characteristic metallurgy", the company realizes the efficient transformation of resources and energy on the spot, forming the company's core advantages in resources, cost, technology, scale and so on. 2) benefiting from the improvement of the prosperity of the industry, the prices of the company's main products PVC, caustic soda and ferrosilicon have continued to rise since 2016, contributing to the rapid growth of the company's traditional main business performance. The net profit of 2017Q1 was 534 million yuan, an increase of 85.82% over the same period last year. We expect that with the stabilization of the economy and the promotion of supply-side reform, the prosperity of the chlor-alkali industry will continue, and the performance of the company's main chemical industry may maintain high growth.
With the forward-looking layout of insurance / fund / bank / securities firm, the strategic investment in financial business has gradually entered the harvest period. In recent years, the company's forward-looking layout of the financial sector. The company currently holds 15.3% of Huatai Insurance / Tianhong Fund / Wuhai Bank / Guodu Securities 15.6% 3.99% and 0.83% respectively. At present, all financial businesses continue to contribute profits to the company, accounting for about 25% of the company's net profit in 2016. With the development and growth of its financial subsidiaries, the proportion and contribution of financial business is expected to increase steadily. On the other hand, with the listing of Huatai Insurance and Ant Financial Services Group, the equity value of Huatai Insurance and Tianhong Fund will usher in a systematic revaluation, and the corresponding equity value held by the company is expected to increase significantly.
Strategic investment in scarce insurance groups, private capital-driven insurance business to accelerate development. Huatai Insurance is one of the only 12 insurance group licenses in China, which is highly scarce. Huatai Insurance Group's property insurance, life insurance and asset management business are highly competitive: 1) Huatai property insurance is one of the few medium-sized property insurances in the industry that have made a profit for five consecutive years (with an average comprehensive cost rate of 98.45%); 2) Huatai Life Insurance has a healthy business structure (70% premium comes from high-value insurance channels) and has entered a stable profit cycle. 3) Huatai's market-oriented competitiveness of asset management is leading in the industry: 91% of the assets under management come from third parties, which is substantially ahead of the industry. Junzheng Group currently holds 15.3% of Huatai Insurance. If the shares held by Petrochina Chemical Group and China Petroleum & Chemical Finance Co., Ltd. are successfully completed, the shareholding will reach 22.3%, making it the largest shareholder of Huatai Group. The vitality of private capital is expected to accelerate the development of Huatai Insurance business.
Investment suggestion: the company's main chemical industry relies on the layout of the circular economy industrial chain and the regional cost advantage of Inner Mongolia, superimposing the upward trend of the prosperity cycle of the company's main product industry, and the company's main chemical industry is expected to maintain rapid growth. The company's strategic layout in the financial field, the development of relevant financial subsidiaries has entered the harvest period, on the one hand, it constitutes the second pillar of the company's performance growth, on the other hand, with the corresponding event-driven will lead to the revaluation of financial equity, the company's financial equity may face substantial appreciation. We are optimistic about the high growth of the company's traditional main business and the value added brought about by the revaluation of the financial business. At the same time, as a leading enterprise in chlor-alkali industry in Inner Mongolia, the company may benefit from the policy dividend of the 70th anniversary of Daqing in Inner Mongolia. We expect the company's annual net profit in 17-18-19 to be 22.32ap27.16 / 3.256 billion yuan, corresponding to the PE of 20.5Universe 16.8Compact 13.9 times. Maintain the company's "overweight" rating.
Risk tips: 1) the price of chemical products has fallen; 2) the equity of Huatai Insurance has yet to be approved.