Event

The company publishes its 2017 semi-annual report.

Main points of investment

Profitability is under pressure, performance is lower than expected

In the first half of 2000, the company realized operating income of 1.493 billion yuan (YoY+16.67%), and the net profit belonging to the shareholders of the listed company was 72 million yuan (YoY-36.41%), deducting 69 million yuan (YoY-34.86%), which was lower than market expectations. The cash inflow from subsidiary Fujia leasing business activities increased significantly in the first half of the year, resulting in a 94.02% year-on-year increase in net cash flow from the company's operating activities. Due to the sharp rise in raw material prices in the refrigeration pipeline and accessories business, which put greater pressure on the company's cost side, the company's sales gross profit margin in the first half of the year was 17.23%, which decreased by 5.07pct compared with the same period last year. Due to the increase in loan interest and acceptance bill discount interest, the company's financial expenses increased by 93.23% year-on-year, the financial expense rate reached 2.95%, increased 1.17pct year-on-year, and the net interest rate decreased to 6.03% year-on-year. The company's profitability was under pressure in the first half of the year. At present, the market share of the company's refrigeration steel pipe is more than 30%, of which the domestic market share of refrigerator condensing tube is more than 60%, and its production and sales rank first in the industry. in the future, it is expected to rely on the strong bargaining power of downstream enterprises, by increasing the average ex-factory price of refrigeration pipes, to restore profitability to the historical normal level.

Refrigeration pipeline and Xinneng car parts plate under pressure, financial leasing into an important profit support sub-business, the company's refrigeration pipeline and accessories business achieved revenue of 1.069 billion yuan (YoY+18.35%) in the first half of the year, but due to the impact of rising prices of raw materials on home appliance parts plate, and the price adjustment mechanism of raw material price fluctuations has a certain lag impact, the gross profit margin of the company's home appliance plate products decreased to 10.48%. Due to the introduction of the new policy in the new energy vehicle industry, new energy vehicle manufacturers are concentrating on re-declaring the announcement catalogue of production and sales of new energy vehicles and the recommended catalogue of new energy vehicle applications, and the production and sales of the industry have also dropped sharply, resulting in a decline in the company's sales of new energy automobile parts compared with the same period last year. In the first half of the year, the company's new energy automobile parts business achieved revenue of 141 million yuan (YoY-37.82%). Financial leasing sector business is relatively stable, is an important factor to support profits in the reporting period, the company's financial leasing business revenue of 100 million yuan (YoY+104.63%) in the first half of the year.

Diversified industrial layout, the performance in the second half of the year is expected to return to positive growth channels. At present, in addition to the original main business of refrigeration pipelines and accessories, the company has added new energy vehicle core parts and financial leasing plates, and has obtained the daily business decision-making and business operation rights of Zhongzhi Automobile through agreement trusteeship, which has laid a solid foundation for the company's follow-up development in the field of new energy vehicles. At the same time, with the help of the resource advantages accumulated in the field of new energy vehicles, the company will do a good job in the post-market services of the new energy vehicle industry, and combine the operation of new energy vehicles with financial leasing at the same time, realize the transformation of the company's business model from new energy vehicle business to "manufacturing + sales and leasing + service" whole industry chain business model. With the landing of the policy of the new energy vehicle industry, it is expected that the production and marketing of new energy vehicles will be greatly improved in the second half of the year, and the new energy automobile parts industry will also improve.

In the company's semi-annual report, it is predicted that the net profit of shareholders of listed companies in the third quarter of 2017 will vary in a range of 130 million yuan, with a range of-14.4%-15.23%, and the performance is expected to return to the positive growth channel.

Profit forecast and valuation

From 2017 to 2019, the company is expected to achieve revenue of 3.098 billion, 3.651 billion and 4.375 billion, an increase of 17.85% and 19.82% over the same period last year, and a net profit of 231 million, 305 million and 405 million for shareholders of listed companies, an increase of 21.15%, 32.15% and 32.59% over the same period last year, and can achieve EPS0.2 yuan, 0.27 yuan and RMB 0.27 yuan. The stock price is valued at 40 times, 30 times and 23 times. Consider that Zhongzhi New Energy vehicle asset injection will form a "manufacturing + sales + leasing + service" whole industry chain business model, long-term development is still worth looking forward to, maintain the buy rating.