1H17 performance meets expectations

Sony Financial announced 1H17 results: operating income was 310 million yuan, down 26% from the same period last year; net profit belonging to the parent company was 39.66 million yuan, down 50% from the same period last year, corresponding to earnings per share of 0.08 yuan. Excluding the impact of cement asset disposal in the same period last year, non-net profit increased nearly fourfold to 39.3 million yuan compared with the same period last year.

Trend of development

Financial leasing and small loan business performed well. As a growth engine, Derun leasing / Deshan small loan 1H17 net profit increased by 25% 65% to 95,29,000,000 yuan, or benefited from business expansion (car financial leasing) and additional outlets (new Hefei Binhu and Lujiang small loan service points). Compared with the end of 16, the balance of 1H17 lease receivables, small loans and pawn all increased by 11% to 3.02 billion yuan; margin deposits were unchanged at 180 million yuan; the turnover of P2P platforms fell 69% to 50 million yuan in June compared with the same period last year; its AMC company obtained a business license at the end of June and is expected to make a profit contribution in the second half of the year.

Wait for the resumption of the review of asset restructuring. The company's merger and acquisition of Haike, a third-party payment company, was approved by the central bank in April, but was suspended after the Anhui Securities Regulatory Bureau filed a case for investigation.

At present, the company has taken the initiative to complete the rectification and reform, and intends to apply for reorganization, audit and recovery in time after receiving the investigation conclusion. According to the website of payment Home, the monthly transaction volume of Haike Rongtong in May 17 is ~ 100 billion, ranking among the top 5 in the bank card collection industry. If the restructuring is successfully completed, Sony and Haike may form three major synergies: channels (urban + rural), business (payment + loan), and risk control (POS pipelining + offline outlets) to create a closed-loop financial service chain.

The controlling shareholders continue to increase their holdings to demonstrate confidence and launch an equity incentive plan to boost morale. Sony Investment added a commitment to increase its holdings by 10.0 billion yuan on the basis of 0.5 billion yuan in the previous period, and the two pledge plans totaled 150 million yuan. In addition, in order to stimulate the enthusiasm of the management team, the company plans to launch an equity incentive plan, which comes from the repurchase of 19.5 million shares (4 per cent of the total share capital) through the secondary market.

Profit forecast

Considering the sluggish short-term growth of the company's pawn, guarantee and P2P business, we lowered our 17e/18e profit forecast by 27.2% to 118 million / 174 million.

Valuation and suggestion

At present, the company's share price corresponds to 33.9x 18e Pamp E. Considering the mood boost from the increase plan, we maintain our neutral rating and target price of 12.5 yuan (taking into account the effect of 10 for 10 dividends), corresponding to 35x 18e Phand E, which is 2.5% higher than the current share price.

Risk.

Failure of asset restructuring and deterioration of loan quality