Main points of investment:
Event: the company released its semi-annual report for 2017. during the reporting period, the company achieved operating income of 1.77 billion yuan, an increase of 109.96% over the same period last year, and a net profit of 84.14 million yuan, an increase of 376.97% over the same period last year. The EPS was 0.1114 yuan, an increase of 376.07%. The company expects the net profit from January to September 2017 to be 103 million to 120 million yuan, a year-on-year change of 200.00%. 250.00%.
With the high growth of operating income, the gross profit margin of aviation business has increased. The company's operating income in the first half of the year was 1.77 billion yuan, and the gross profit margin of YoY+109.96%, increased by 2.68ppt to 35.13%. In different business areas, the company's sales income of construction machinery was 1.198 billion yuan, and YoY+46.15%, accounted for 67.69% of the income, but the gross profit margin decreased by 4.35ppt to 28.22%. The aviation business income was 509 million yuan, accounting for 28.75% of the income, and the gross profit margin was 54.80%. In the income structure, the increase in the proportion of aviation business makes up for the decline in the profit margin of construction machinery and increases the comprehensive gross profit margin. In terms of expenses, the sales rate dropped sharply to 5.24% compared with the same period last year, while the management fee increased by 2.18ppt to 11.11%, and the cost decreased slightly. Taken together, the company's net interest rate increased to 4.75% 2.66ppt, increasing profitability.
Sales of construction machinery are picking up, and energy-saving digging is expected to improve the profitability of excavators. The company's sales of construction machinery rebounded in the first half of the year, with a substantial increase of 46.15% in revenue. Piling machinery and excavation machinery are the main components of income. The sales income of piling machinery is 589 million yuan, the proportion of YoY+43.95%, in income is 33.3%, and the gross profit margin is 30.68% (- 7.16ppt); the sales income of excavation machinery is 493 million yuan, the proportion of YoY+41.14%, in income is 27.8%, and the gross profit margin is 26.12% (- 0.77ppt). The company has strong piling machinery, the market share of pile driving machine is the first in China, and the market share of rotary drilling rig ranks third in China, second only to Xugong Machinery and Sany heavy Industry. In terms of excavators, the company's main products are small and micro excavators, and the gross profit margin is lower than that of medium and large excavators. The company has added medium and large energy-saving excavators, which enriches the category of excavating machinery products and will improve the overall gross profit margin level of the company's excavating machinery. We judge that the company's construction machinery products will continue to benefit from the construction of PPP projects such as the company's facilities and water conservancy facilities, as well as infrastructure investment in overseas "Belt and Road Initiative" countries.
AVMAX aviation business boosts profitability. In October 2016, the company completed the delivery of 11% of the shares in the second phase of AVMAX, achieving a smooth consolidation of 60% of the shares. From October to the end of 2016, AVMAX had a consolidated income of 224 million yuan, a gross profit margin of 64.98% and a net profit of 82.68 million yuan. In the first half of the year, the revenue of AVMAX aviation business was 509 million yuan, and the gross profit margin dropped slightly to 54.8%. The company completed the third phase of 13.33% equity delivery in July 2017, and the performance contribution of the aviation business will be further improved in the second half of the year.
Profit forecast and investment rating: the company is expected to achieve operating income of 3.37 billion yuan, 4.003 billion yuan and 4.619 billion yuan from 2017 to 2019, with a net profit of 174 million yuan, 272 million yuan and 345 million yuan, and an EPS of 0.22,0.35,0.44 yuan, corresponding to 38.3X/24.6X/19.3X. Maintain the recommended rating.
Risk hint: sales of construction machinery did not meet expectations, and AVMAX business revenue declined.