The results in the first half of 2017 were lower than expected
Aoyang Technology announced its results for the first half of 2017: operating income of 2.61 billion yuan, an increase of 18% over the same period last year; net profit belonging to the parent company was 96.62 million yuan, an increase of 2.5% over the same period last year, corresponding to a profit of 0.13 yuan per share. The company's revenue was in line with expectations, but the composite gross profit margin fell 0.97ppt compared with the same period last year, resulting in a lower-than-expected net profit.
Trend of development
Tight supply leads to a continuous rise in viscose prices, which is expected to boost the company's performance in the second half of the year. Since August, the fourth batch of environmental protection inspectors officially kicked off, viscose staple fiber in the inspection area accounted for 61% of the production capacity, affected by this supply will be further tightened, the current industry operating rate has fallen to the lowest 81% of the year. In addition, the Ministry of Industry and Information Technology issued the Viscose Fiber Industry Standard conditions (version 2017) on August 9, which made higher requirements for industry access conditions, and it is expected that the new production capacity will slow down in the future, which will benefit the leading enterprises in the industry. The company currently has a production capacity of 300000 tons, with the arrival of the traditional peak season "Golden Nine Silver 10", viscose prices are expected to remain high, bringing improvement to the performance in the second half of the year. Funing Aoyang, a subsidiary of the company, plans to invest in the construction of 160,000 t / a differential viscose project to improve product structure, phase out some backward production capacity and improve overall profitability.
The layout of a large health industry, and the dual-main business model is gradually taking shape. The layout of the company's large health industrial chain is becoming more and more perfect and has two-wheel drive. at present, four general hospitals under the company have begun operation, opening a total of 2200 beds, while Xuzhou Aoyang Huaan Rehabilitation Hospital was officially opened on August 15, 2017. in the future, the company will also speed up the construction of rehabilitation hospitals in Zhangjiagang, Huzhou and other cities to speed up remote replication to form regional competitiveness in East China.
Profit forecast
Due to the decline in viscose margin, we have lowered our earnings per share forecasts for 2017 and 2018 by 17% and 16% from RMB0.41 and RMB0.48 respectively to RMB0.34 and RMB0.4 respectively.
Valuation and suggestion
At present, the company's share price corresponds to 2017 23x/20x 18-year Universe E. We maintain the recommended rating, but lower the target price by 16.67% to RMB 9.50, which is 20.1% upside from the current share price. The target price corresponds to the 2017 28x/24x Placer E for 18 years.
Risk.
The price of viscose staple fiber and its raw materials fluctuated greatly; the development of large health industry did not meet expectations; the valuation center moved down.