Event: in the first half of 2017, the company achieved a total operating income of 100 million yuan, an increase of 17% over the same period last year, and a net profit of 190 million yuan, down 39% from the same period last year. The reason for the differentiation between operating income and homing net profit is that investment income has shrunk by 250 million yuan due to the base effect (a project changed from cost measurement to fair value measurement in the same period last year). The core marginal changes of the company include: (1) the fund transformation of the company has progressed smoothly, with 12 investment projects completed by each fund, with a total investment of 160 million yuan; (2) the company has increased its foreign equity investment of 150 million yuan, including four 10 million-level projects; and (3) holding Intarcia smoothly, international investment has started.
The income of venture capital has dropped temporarily, and the transformation of funds has been smooth. The venture capital business achieved 6.65 million yuan in revenue in the first half of 2017, down 9% from the same period last year. The company is strategically transforming from a simple VC/PE investment institution to an asset management platform, using its own funds combined with external capital to establish a mixed ownership parent fund to invest in specialized and regionalized VC/PE, real estate debt / equity funds and overseas funds in Hong Kong, the Bay area of the United States and other places. By the end of the mid-reporting period, the company has contributed to the establishment of 32 funds of various types, with a total subscription scale of 12.5 billion yuan, a cumulative capital scale of 7.2 billion yuan, and an existing fund scale of 4.1 billion yuan. These funds have achieved a total of 126 existing investment projects, with an investment of 4.5 billion yuan. Among them, the funds set up by the company during the reporting period have completed 12 investment projects, with a total investment of 160 million yuan.
The project is rich in reserves and internationalization is progressing smoothly. In the first half of 2017, the company increased its overseas equity investment by 150 million yuan, including four 10 million-level projects: Luxin Kangda, Luxin New Materials, Capital Market Fund, and Luxin Bank of Communications. During the reporting period, the Golden Kirin project invested by the company's equity fund was successfully listed in A shares, and the joint project of high-tech investment by wholly-owned subsidiaries was listed on the new third board. By the end of the interim report period, 11 target companies invested by the company set up funds to achieve A-share listing, and 29 target companies were listed on the new third board. Luxin Venture Capital focuses on new materials, information technology, high-end equipment manufacturing, marine development, new energy, new medicine and energy conservation and environmental protection industries and other strategic emerging industries. At present, nearly 60% of Luxin's project funds are invested in Shandong Province. The company's goal is 5-3-2, that is, 50% in the province, 30% in other parts of the country, and 20% overseas. During the reporting period, the company completed its first investment business in the United States, participated in the investment in American pharmaceutical company Intarcia through its subsidiary high-tech investment, and issued an announcement in March disclosing its shareholding ratio of 0.771%.
The impact of the new rules on shareholding reduction is limited. By the end of the reporting period, the company had held no less than 5 per cent of three listed companies: ST Dongshu (8.82 per cent), Longli Bio (10.93 per cent) and Tongyu heavy Industries (9.29 per cent). We believe that although the restrictions on bulk trading under the new rules have affected the company to some extent, since the new rules still allow the reduction of no more than 1% of the total number of shares in the company within three months through centralized competitive trading on the stock exchange, according to the (relatively slow) reduction of the company's holdings in the past three years, the overall exit time of the company is not significantly affected.
The main business is developing well. In the first half of 2017, the main business income of the company's abrasives business reached 84.01 million yuan, an increase of 4% over the same period last year. The company's main business occupies a leading position in the industry, in which the production capacity of the abrasive industry is currently 20000 tons / year, the abrasive industry is 3000 tons / year, and the production capacity of sand cloth sand paper is 20 million square meters / year.
Investment advice: buy-An investment rating, 6-month target price of 27.19 yuan. We estimate that the EPS of the company from 2017 to 2019 is 0.73,0.82 and 0.95 respectively.
Risk tips: macroeconomic downside risks, industry risks, operational risks