The decrease in the bidding volume of the power grid leads to a decline in business performance. Weisheng Group (3393.HK) announced its annual operating results in the first half of 2017 on August 23: operating income fell 6 per cent year-on-year to 1.428 billion yuan (RMB, the same below); gross profit fell 8.3 per cent to 418 million yuan; gross profit margin fell to 29 per cent from 30 per cent in the same period last year; earnings per share fell by 17 per cent, down 3.2 per cent from a year earlier, without paying dividends. The decline in operating performance in the current period is mainly due to the decline in the bidding volume of State Grid, and the increase in various expenses resulted in a decrease in net profit of 5.5% to 194 million yuan compared with the same period last year, such as a substantial increase in sales and R & D expenses by 38.7%.
The performance of ADO improved significantly, while the AMI of electricity metering decreased. After several years of market expansion and product research and development, ADO business has achieved gratifying results. in the first half of this year, ADO business revenue was 360 million yuan, an increase of 36% over the same period last year. On the other hand, the electricity metering AMI business fell sharply, down 21.6% from the same period last year. We believe that the main reason is that the popularization rate of smart meters in China has exceeded 60%, and the next generation of smart meters has not yet entered the tender. As for communications and fluid AMI, thanks to the Chinese government's continued efforts to promote tiered water prices and one meter per household, while provinces and cities speed up the implementation of policies such as rural tap water entry, this business has maintained steady growth.
Follow the "Belt and Road Initiative" policy and vigorously develop overseas markets. As the country vigorously promotes the opportunities brought by "Belt and Road Initiative", the company's overseas market business has covered nearly 30 countries along the "Belt and Road Initiative" route. In the first half of this year, the proportion of overseas customers has risen to 20% from 11% in the same period last year, and sales are up 63% from the same period last year.
Our point of view: Weisheng Group Co., Ltd. is a leading supplier of energy metering equipment, systems and services in China, and its performance has declined in the short term due to the decline in bidding volume of power grid companies. The company is currently actively carrying out business adjustment; at the same time, adjusting the customer structure, vigorously expand overseas business and intelligent power distribution ADO business. Investors are advised to pay attention to the company's current stock price, which is about 10 times PE for 2017 results.
Risk hint: the bidding volume of power grid is reduced; overseas business expansion is not as expected.