Events:

The company released its semi-annual report for 2017. during the reporting period, the operating income was 8.937 billion yuan, an increase of 69.74% over the same period last year. The net profit belonging to shareholders of listed companies was 240 million yuan, an increase of 125.34% over the same period last year. The net profit after deduction belonging to shareholders of listed companies was 239 million yuan, an increase of 135.99% over the same period last year, and EPS 0.11 yuan. Of this total, Q2 realized a net profit of 124 million yuan, an increase of 115.16% over the same period last year and 6.98% month-on-month growth.

At the same time, the company expects to achieve a net profit range of 312.58 million yuan to 396.88 million yuan from January to September 2017, an increase of 47.69% to 87.52% over the same period last year.

Comments:

1. The company's various businesses go hand in hand, and the scale of refined oil and rubber trade is growing rapidly. 2017H1 achieved business income of 8.937 billion yuan, an increase of 69.74% over the same period last year. From a business point of view, the company's revenue from refined oil trade reached 5.258 billion yuan, accounting for 58.84%, an increase of 36.22% over the same period last year, which is an important driving force of revenue growth. During the reporting period, the company's rubber trading business grew rapidly, with operating income reaching 2.4 billion yuan, an increase of 352.06% over the same period last year, accounting for 26.85% of operating income, which is another important force driving the substantial growth of the company's revenue. Rubber trading business is a new trade business that the company has vigorously expanded this year. On the whole, the demand for natural rubber in China's automobile market is increasing year by year, while the domestic natural rubber supply is insufficient. There is a lot of room for import trade business. During the reporting period, the company's jet fuel business grew rapidly, achieving an operating income of 950 million yuan, an increase of 861.70% over the same period last year; the revenue scale of the company's LPG sales and transportation business declined slightly, achieving an operating income of 115 million yuan, down 4.31% from the same period last year.

The gross profit margin of the company during the reporting period was 4.33%, a year-on-year decline of 1.74pct. There were two main reasons for the decline. On the one hand, the proportion of revenue from oil products trade and rubber trade with lower gross profit margin increased significantly during the reporting period. On the other hand, the gross profit margin of various businesses of the company (except rubber trade) declined to varying degrees, and the gross profit margin of oil products trade, which accounted for the largest proportion of revenue, fell by 0.46pct to 2.57%. The gross margin of factoring fell 19.71pct to 59.75%.

During the reporting period, the company's net sales profit rate was 2.90%, an increase of 0.28pct over the same period last year. When the gross profit margin decreased by 1.74pct, the increase in net profit rate was mainly due to two aspects: on the one hand, the expense rate decreased by 0.41pct during the company's period; on the other hand, the company lost 69.64 million yuan in investment income in the same period last year, and there was basically no investment income loss this year, so the net profit rate increased year-on-year.

During the reporting period, the company's financial expenses decreased significantly, from 2.8233 million yuan to-5.7295 million yuan, mainly due to exchange gains brought about by RMB appreciation in the first half of the year; the company's management expenses remained stable on the whole; the company's sales expenses reached 12.2466 million yuan, an increase of 69.46% over the same period last year, mainly due to the increase in freight charges brought about by the growth of the company's refined oil trade business.

2. Through asset exchange, the company has built a two-wheel drive development strategy of "energy + finance". By selling its former agrochemical business to Huaxin in Guangdong in 2015, the company has all stripped off its previously volatile chemical assets. then gradually injected into the energy trade and commercial factoring and other financial business, gradually built the company's "energy + finance" two-wheel drive development strategy. In the future, the company will comprehensively develop its existing energy and financial business, while actively looking for opportunities for epitaxial development in the energy and financial sectors.

At present, the company's energy sector mainly includes oil products trade and rubber trade. Oil products trade is mainly oil products re-export business of Hong Kong natural gas of the company's wholly-owned grandson company, and oil products business of Fujian Huaxin, a wholly-owned subsidiary. Catch the relevant resources of the company's energy business, the company vigorously develop rubber domestic trade business, while the company through Yangpu International Energy Trading Center to carry out energy and chemical industry product trading service business.

At present, the factoring business carried out by Shanghai factoring, the main wholly-owned subsidiary of the company's financial business, focuses on the petrochemical industry chain, forms a good cooperative relationship with many domestic financial institutions, and broadens the company's financing channels.

We are optimistic about the company's strategic development model of "energy + finance". The energy industry is large in scale, and the company relies on Huaxin Group, which is rich in energy resources and provides strong support for the development of the company's energy business. the energy industry is a capital-intensive industry with many financing needs, and the company has a large market demand for commercial factoring and has a bigger and stronger industrial foundation.

3. Investment suggestions

It is estimated that the company's net profit from 2017 to 2019 is 4.96,5.33 and 678 million yuan respectively, and the corresponding EPS is 0.21,0.23,0.29 yuan respectively. The current share price is 6.95 yuan, and the corresponding PE is 33.0,30.7 and 24.2 times, respectively.

Risk hint: RMB exchange rate fluctuates greatly, and the price of energy and chemical products fluctuates greatly.