Key points of investment
Incident: Hunan Development released its 2017 semi-annual report on August 17. During the reporting period, the company's revenue was 149 million yuan, down 9.64% from the previous year; the net profit of the mother was 67.93 million yuan, a decrease of 29.75% over the previous year; the non-net profit of Guimu was 67.99 million yuan, down 29.61% from the previous year; and the basic earnings per share were 0.15 yuan/share.
The reason the company's operating income and profit during the reporting period were lower than the same period last year was mainly influenced by factors such as the reduction in utility prices across the province and the company's medical and pension business still in the nurturing period. The power industry achieved revenue of 144 million yuan during the reporting period, a year-on-year decrease of 11.86%. The health industry achieved revenue of 4,7786 million yuan, an increase of 1786.78% over the previous year, but its share of overall revenue is still low.
The company continues to strengthen the foundation of the hydropower business, and the hydropower sector is developing steadily. During the reporting period, in the face of flood control and flood relief tests, the company's hydropower sector continued to maintain safe and efficient production and achieved good power generation efficiency. In the first half of the year, Zhuzhou Avionics completed 46,917,900 kilowatt-hours of feed-in electricity, Bird's Nest completed 38,2894 million kilowatt-hours of feed-in power, and Python completed 141,5555 million kilowatt-hours of feed-in power. The company is proceeding with the expansion and capacity expansion work in an orderly manner. The capacity increase has been approved by the Hunan Provincial Development and Reform Commission, and the Hunan Hydropower Design Institute has been hired to conduct plan verification and pre-feasibility studies for the expansion.
The company's rehabilitation medical chain management system has been further regulated. Currently, the company holds and participates in 5 hospitals, operating 900 beds, and about 300 beds under construction. Xiangya Boai Rehabilitation Hospital has passed the three-year CARF certification by the International Rehabilitation Quality Committee, making it the third hospital in the country and the only rehabilitation specialist hospital in the central region that has passed the highest level of CARF certification.
The company's pension business model has been continuously improved during the expansion process. The company mainly provides institutions integrating medical care, community home care services and related products. The Chunhua Health Industrial Park institutional pension project progressed in an orderly manner. On the basis of the master plan, the institutional pension market and product positioning were thoroughly studied to further refine the product design. The company is based in Changsha and is developing community home care services throughout the province. The “Internet+Community Home Care” service system combining online and offline community home care was the first to be operated in Changsha City, and 23 operation centers have been set up. Exploring the establishment of community embedded small and micro institutions is being explored.
Profit forecasting and risk estimation: The company continuously optimizes the management of existing hydropower assets, and the hydropower business performance is good. The medical and old-age care industries have also received strong support from national policies, and the market prospects are broad. We are optimistic about the development of the company's health industry. The company's 2017-2019 EPS is expected to be 0.29/0.31/0.36 yuan, corresponding to the current stock price PE of 42/39/34 times, maintaining the “increase in holdings” rating.
Risk warning: Elderly care projects are falling short of expectations, and there is a shortage of talents in the field of rehabilitation medicine