Event: the company released semi-annual report for 2017, with revenue of 277 million (- 20.88%) and net profit of 98.89 million yuan (+ 292.99%). The results forecast that the net profit of returning home will increase by about 500% in the third quarter.
Main points of investment
The substantial increase in the company's performance mainly comes from the profits and losses related to demolition compensation.
The substantial increase in the net profit of 2017H is mainly due to the completion of the transfer of assets in the old factory area by the parent company and the recognition of the profits and losses related to demolition compensation in the current period, resulting in a substantial increase in non-operating income and net profit. In terms of products, the revenue of ventilation and air handling system equipment was 120 million yuan, + 28.22% compared with the same period last year, accounting for 43.38% of business income; revenue from special materials and energy engineering pipe fittings was 157 million yuan,-38.83% compared with the same period last year, accounting for 56.62% of business income. ZTE equipment revenue decline is mainly affected by the macroeconomic, steel market and upstream customer procurement demand slowdown and other factors, reduced orders, contract execution slowed down, product gross margin declined.
The decline in comprehensive gross profit margin is obvious, and the decline in revenue and the market environment lead to an increase in rates.
2017H comprehensive gross profit margin of 18.84%, year-on-year-17.84pct. From a product point of view, the gross profit margin of ventilation and air handling system equipment, special materials and energy engineering pipe equipment is 17.8%, 19.64%, respectively, compared with the same period last year-4.72pct/-22.21pct, the gross profit margin of special materials and energy engineering pipe equipment decreased significantly. The total expense rate during the period is 30.51%, year-on-year + 4.77pct, in which sales, management and financial expense rate is year-on-year + 2.13/+1.96/+0.68pct. On the one hand, the increase in corporate fees is due to a decrease in the denominator due to the decline in revenue, and on the other hand, due to the poor market environment, the absolute value of the company's sales expenses increased by 19% compared with the same period last year.
The growth of HVAC equipment in the traditional advantage business of Nuclear Power plus Rail Transportation Co., Ltd.
In 2017, the National Energy Administration made it clear that it plans to start construction of 8 units within 2017, with an additional installed capacity of 6.41 million kilowatts. The company is the leader of nuclear power HAVC industry, with civil and military nuclear safety equipment design, manufacturing license and other qualifications, helping to improve the market share of nuclear power fans and wind valves. In addition, rail transit and highway construction will continue to rise in China during the 13th five-year Plan period, which will lead to the increasing demand for HVAC equipment. At the time of listing, the company has achieved the first, the top two and the top three in China's market share in the fields of nuclear power, subway and tunnel, respectively. With the breakthrough of HVAC difficulties in the third-generation nuclear power plants and the localization of HAVC in the second-generation nuclear power plants, the company can effectively turn the industry growth into its own performance growth.
The industrialization of 3D printing of heavy metal is advancing layer by layer, and the income is getting closer and closer.
In July 2017, Nanfang Zengliang, a subsidiary of the company, signed a joint development agreement with Dongfang Electric heavy Machinery Company to further optimize the electric fusion precision forming technology of heavy metal components in process and testing, and promote the industrialization of the company's heavy metal 3D printing technology. Southern Zengliang has completed the printing of nuclear power main steam pipeline penetration simulation parts and the first stage basic performance testing and identification of ACP100 pressure vessel material, and the comprehensive mechanical properties are excellent. At present, the second stage of special performance testing of this material is being carried out, and the nuclear grade application technology is about to mature. Up to now, Southern Zengliang has been granted 11 invention patents and received 1.84 million yuan in support funds for advanced equipment manufacturing in March 2017. In addition, the development of 3D printing derivative business, the layout of 3D printing industry and the construction of industrial 3D printing ecosystem will create new profit growth points for the company.
Profit forecast and investment suggestion
We expect nuclear power performance to pick up gradually, and in view of the broad application prospect of heavy metal 3D printing technology, we expect the EPS for 2017-18-19 to be 0.20pm 0.02max 0.05X, corresponding to PE 540max 217X respectively, maintaining the "overweight" rating.
Risk hint: nuclear power business is lower than expected, 3D printing business development is not as expected.
