I. Incident Overview
The company released its 2017 semi-annual report, with operating income of 332 million yuan for the first half of the year, a decrease of 5.61% over the previous year; net profit attributable to shareholders of listed companies was 16 million yuan, an increase of 108.49% over the previous year.
II. Analysis and Judgment
Market development continues to break through. During the reporting period for the double increase in revenue from copper products and aluminum products, the company conducted contract reviews and order analysis for magnet wire products, and achieved good results in indicators such as customer development, product sales, and product added value. Revenue from copper products increased 13.27% year on year, revenue from aluminum products increased 28.26% year on year, and gross margin increased steadily. We believe that the company's market strategy will help to continuously improve the company's operating efficiency, expand new customers, and enhance the company's performance.
Reactor product technology is leading the way. UHV engineering orders have gradually confirmed their contribution performance. The company began entering the reactor field in 2015, completed the certification of high-end products in a short period of time, and successfully tested the world's first ±1100kV dry-core DC flatwave reactor. The product has already won bids for multiple UHV lines, with a total bid amount of nearly 185 million yuan. During the reporting period, the tandem reactor business achieved operating income of 504 million yuan, which is more than the whole of last year, which is the main reason for the sharp increase in the company's net profit to its mother. In the second half of the year, as the winning products continue to be delivered, the company's performance growth trend is expected to continue. After having experience in connecting to networks, reactor products are expected to continue to win bids for UHV projects, and we continue to be optimistic about the development prospects of the company's reactor business.
Xinhuikai has completed the transfer of accounts, and the development of the two main businesses has begun
Recently, the company successfully acquired 100% of the shares of Xinhuikai Technology (Shenzhen) Co., Ltd., extending the business segment to the field of touch displays, and the development of the dual main business began. Xinhuikai's products include capacitive touch screens, liquid crystal display modules, touch display modules, and supporting ITO glass, cover glass, etc., which are widely used in vehicle displays, medical equipment, industrial control and other fields. Xinhuikai's performance promises for 2017, 2018, and 2019 were net profit of no less than 113,014,300 yuan, 13,6535,500 yuan, and 153.4927 million yuan, respectively.
In the context of rapid development of market demand for automotive touch screens and in-depth cooperation with Corning Glass, Xinhui's performance may exceed performance promises. We are optimistic about the development prospects of the company's dual main business layout of magnet wire reactors and touch display products.
III. Profit Forecast and Investment Suggestions
According to Xinhuikai's full-year consolidated estimates in 2017, the company's EPS for 17-19 is expected to be 0.46, 0.58, and 0.66 yuan respectively, and the corresponding PE is 29X, 23X, and 20X respectively, maintaining the “Highly Recommended” rating.
4. Risk warning:
The development of the touch display industry fell short of expectations; the expansion of the reactor market fell short of expectations.
