Main points of investment:
Revenue and profits increased both in the first half of the year, and the double main businesses of education and food grew steadily. Guanghong Holdings released its semi-annual report for 2017. during the reporting period, the company achieved operating income of 1.046 billion yuan, an increase of 0.53% over the same period last year, operating profit of 74.15 million yuan, an increase of 27.43% over the same period last year, and net profit of 53.19 million yuan, an increase of 15.61% over the same period last year. Of this total, the revenue of the book distribution business was 513 million yuan, down 5.78% from the same period last year, and the gross profit margin was 18.64%, up 2.32% from the same period last year; the revenue of the food business was 532 million yuan, up 7.48% from the same period last year, and the gross profit margin was 9.99%, down 3.07% from the same period last year.
The rate of short-term expenses has increased, and the increase in investment income has become the main reason for the increase in profits. During the reporting period, the company's production and operation are faced with opportunities and challenges. The education distribution sector faces challenges such as the qualification declaration for the distribution of teaching materials and the recycling of free teaching materials; while pig prices have continued to rise last year, pig prices have gone up and down this year, and the production and marketing of chicken seedlings has been hit by H7N9. Facing the pressure of the economic situation, the company's short-term expense rate has increased, including sales expenses of 42.43 million yuan, an increase of 7.09% over the same period last year, and management expenses of 52.2 million yuan, an increase of 8.99% over the same period last year. The company achieved an investment income of 9.68 million yuan in the current period, compared with-8.92 million yuan in the same period last year. The increase in investment income is the main reason for the increase in the company's return net profit.
Relying on regional advantages, create a cold chain smart port project, invigorate the original cold storage and market land. On June 12, 2017, the company announced a letter of intent to cooperate with Guangzhou Shijing cement Plant and Guangzhou Changxian Real Estate Co., Ltd. to develop the "Food Cold chain Wisdom Port" project. It is proposed to build a comprehensive one-stop food industry cluster with complete exhibition industry chain, complete facilities and complete functions. To create a food headquarters industrial district with multi-functional integration of year-round exhibition and trade, conference and exhibition, commercial services, e-commerce, financial services, information release, R & D and design, personnel training and entertainment experience, it has become a national leading cold chain smart port complex of frozen food. The planned construction area of the project is 250000 square meters, covering an area of 200mu. It is planned that the size of the cold storage group will reach 100000 tons. The smooth landing of the project, on the one hand, will help to give better play to the company's management, service, technology and brand advantages in the cold chain industry, realize industrial transformation and upgrading, and improve the enterprise's core competitiveness and revenue capacity; on the other hand, the company's original cold storage and market land activation is expected to accelerate, bringing strong capital guarantee for the company's sustainable development.
The subsidiary "Education Bookstore" will increase the capital and shares of the joint venture company and strengthen the control of the issuing channels. On August 10, 2017, Guangdong Education Bookstore Co., Ltd., a wholly-owned subsidiary of the company, increased its 62 joint ventures with a total capital increase of 13.05 million yuan, all of which came from the education bookstore's own funds.
After the completion of capital increase and share expansion, Education Bookstore uniformly holds 51% of its 62 associated enterprises, and the target enterprises are included in the scope of the consolidated financial statements of Education Bookstore. Through this increase of capital and shares, on the one hand, it strengthens the control over the distribution channels, which is conducive to the business development of the company in the field of book distribution; on the other hand, it can strengthen the state-owned control of capital, which is conducive to promoting enterprises to become stronger, better and bigger.
The advantages of regional leaders remain unchanged, and the advantages of education + food channels are highlighted. Facing a series of challenges, such as the qualification declaration for the distribution of teaching materials, the recycling of free teaching materials, and the arrival of books before class, the education distribution section has taken the initiative to strengthen contact and communication with all parties, and make use of its channel advantages in Guangdong Province to promote the construction of distribution service system in an all-round way. By adopting differential means and technological transformation to stabilize customers, optimize product structure and business model to expand the trade of frozen goods, the profitability of "cold storage + market" has been further consolidated and improved. high-risk and low-benefit business has been effectively controlled, and the quality of operation has been significantly improved. We believe that in the future, the company will strive to achieve a precise balance between stable growth and structural adjustment, so as to maintain the growth of both revenue and net profit.
Investment advice and performance forecast. We believe that the company (1) combined with the advantages of background resources, recent system optimization actions, regional national reform goals, the company's strategic upgrading demand is obvious. On the one hand, in the education industry, Guanghong has a leading channel advantage in Guangdong Province, strong cooperation in grafting educational resources and expanding product lines, relatively solid financial foundation, steady growth in income and profitability, abundant cash reserves, low debt ratio and other characteristics, financial strength to build a strong backing for transformation and upgrading. On the other hand, the company is not deeply involved in other areas of the education industry other than teaching materials, and still needs to cooperate to shorten the learning curve. (2) there is a certain margin of safety in valuation:
In the urbanization process of Guangzhou, Zhongshan and Panyu, the company's original industrial land has the possibility and necessity of changing land use and significantly increasing its value, which is also in line with the inherent needs of the company's strategic upgrading and optimizing asset structure; the company's original dual main business has a unique regional monopoly advantage, facing the opportunity of consumption upgrading background and steady growth of income and profit.
Based on the trend of existing business development, regardless of the possible future capital operation, we predict that the company's net profit in 2017 and 2018 will be 127 million and 141 million respectively, and the corresponding EPS will be 0.22 yuan and 0.24 yuan respectively. Combined with the valuation level of the listed companies in the same industry, the profit contribution of the two main industries of the company, and the background trend of the company's strategic upgrading, we will initially give 47 times PE in 2017, corresponding to the target price of 10.34 yuan per share, and maintain the buy rating.
Risk hint. Extension, land activation is not as expected, food cold chain, teaching material distribution industry risk, market risk and so on.
