Main points of investment
Event: Yongding shares released its semi-annual report for 2017. the company achieved operating income of 904 million yuan, down 13.9 percent from the same period last year, and its net profit was 132 million yuan, an increase of 16.0 percent over the same period last year.
Employee stock tenure extension + equity incentives, double incentive policy to demonstrate confidence, performance is expected to boost. After the implementation of the employee stock ownership plan in 2015, the company effectively mobilized the enthusiasm of employees. In June this year, the company decided to extend the employee stock ownership plan to 18 years and August, to further consolidate the results of the employee stock ownership plan. In August, the company decided to implement an equity incentive policy, granting 21.495 million restricted shares to its core executives and technical staff. The conditions for lifting the restrictions in the three batches are as follows: based on the average return net profit in 2014-2016, the return net profit in 2017-2019 increased by 30%, 50% and 100% respectively (corresponding to 249 million, 288 million and 383 million). Equity incentive and employee stock ownership plan bind the interests of shareholders, employees, the company and the management together. on the one hand, it improves the incentive system of the company, on the other hand, the performance goal shows the management's confidence in the future development of the company. it also helps to fully mobilize the enthusiasm of the company's employees and is conducive to long-term development.
Overseas EPC has a long business cycle and is expected to boost performance in the future. As the national strategy of "Belt and Road Initiative" and "China-Bangladesh-Burma-India Economic Corridor" has entered a payback period, the company's overseas power stations and power transmission and transformation grid contracting projects have benefited. In the past 16 years, the company has consolidated the Ethiopian base areas in Southeast Asia, Bangladesh and East Africa, developed its business in Laos, Zambia and other places around it, and signed orders of more than 10 billion yuan, with an average construction period of 4-5 years. With the progress of the project and the gradual recognition of revenue, overseas business may gradually begin to develop in the next year or two.
Diversification increases vitality and development opportunities are promising. The company's diversified layout of optical fiber and cable, overseas EPC projects, automotive wiring harness and big data industry, multipole drive performance growth. With the landing of the national broadband strategy, the optical fiber and cable industry is expected to continue to thrive, and the company's optical cable business is expected to benefit. At the same time, the company continues to order the car wire harness, Jinting wire harness development is expected.
Profit forecast and investment advice. The operation of the company is relatively stable. In view of the slower-than-expected progress of overseas projects, the profit forecast is lowered, and the EPS from 2017 to 2019 is expected to be 0.32 yuan, 0.39 yuan and 0.48 yuan respectively. Give the company a valuation of 30 times in 2017, corresponding to the target price of 9.6 yuan, and maintain a buy rating.
Risk hint: the risk that the progress of overseas projects is not up to expectation, the risk of exchange rate changes.