I. Overview of events

According to the 2017 semi-annual report, the company achieved an operating income of 936 million yuan in the first half of the year, an increase of 75.60% over the same period last year, and a net profit of 62.6857 million yuan belonging to shareholders of listed companies, an increase of 36.74% over the same period last year.

II. Analysis and judgment

The quantity and price of prestressed steel products are rising, and the demand for infrastructure continues to pull.

Driven by downstream demand and rising prices of raw materials, the company's volume and price of prestressed steel products rose by 31.67% per ton in the first half of the year compared with the same period last year, and sales of prestressed steel increased by 36.62% over the same period last year. The company achieved sales revenue of 540 million yuan in the second quarter, an increase of 51.72% over the same period last year, the highest single-quarter level in 11 quarters. We believe that with the 13th five-year Plan and the gradual development of Belt and Road Initiative's strategy, railways, highways, water conservancy and other projects are expected to accelerate the landing, and prestressed steel products are expected to maintain strong demand. At present, there are about 240 domestic prestressed steel products manufacturers, but most of the production capacity is small, there is a large gap between the production technology and the company, and the market pattern is relatively scattered. As the industry leader, the company will continue to benefit from the industry capacity removal in the future, and the industry concentration is expected to be further enhanced.

Exchange rate factors and raw material fluctuations affect profit performance to a certain extent.

The financial expenses of the company in the first half of 2017 were 2.4246 million yuan, which increased to a certain extent compared with the same period last year (- 11.4107 million yuan in the same period last year), mainly due to the fluctuation of RMB exchange rate, the exchange gain decreased and the exchange loss increased. On the other hand, the price of wire rod, the main raw material of prestressed steel products, rose sharply in the first half of the year, the company's purchasing price per ton increased by about 45% over the same period last year, and the operating cost of prestressed steel products increased by 91.53% compared with the same period last year, affecting the company's gross profit margin and performance to a certain extent.

Continue to benefit from Belt and Road Initiative and Beijing-Tianjin-Hebei integration strategy, new production capacity is expected to increase performance

The company set up Xinjiang Yinlong in 2015, and at present, a number of production lines have been completed and put into production. It is the only production base of prestressed steel products in Xinjiang. It is expected to continue to benefit from the demand for infrastructure in Xinjiang, and is expected to radiate Belt and Road Initiative. The company's fund-raising project will be put into production this year, and Hebei Hejian Branch and Hejian Baozelong production base are expected to benefit from the demand for Beijing-Tianjin-Hebei infrastructure, which is expected to continue to thicken the company's performance.

Third, profit forecast and investment suggestions:

We estimate that the company's EPS from 2017 to 2019 will be 0.49 yuan, 0.59 yuan and 0.71 yuan respectively, and the corresponding PE will be 39 times, 33 times and 27 times respectively, maintaining a "highly recommended" rating.

Fourth, risk tips:

Investment in infrastructure fell short of expectations, the RMB exchange rate fluctuated sharply, and the price of raw materials fluctuated sharply.