3Q17 performance is lower than expected.
Sony Financial announced its results for the first three quarters: operating income was 460 million yuan, down 26% from the same period last year; net profit was 39.59 million yuan, down 62% from the same period last year; excluding the impact of the disposal of cement assets in the same period last year, non-net profit increased by 17% to 39.01 million yuan compared with the same period last year. Of this total, 3Q's single-quarter operating income was 140 million yuan, down 27% from the same period last year, and the net loss attributed to the parent company was 70,000 yuan.
Trend of development
The income is weak and the operating efficiency decreases, and the company's 3Q single-quarter performance is lower than expected. 1) the key operating indicators of leasing / small loan / P2P business showed a month-on-month decline: the balance of loans and advances (small loans and pawn business) issued by the company at the end of 3Q17 was-3% to 1.58 billion; the balance of long-term receivables (financial leasing business) was-4% to 2.91 billion; and the transaction volume of Dezhong Financial P2P platform in the third quarter was-36% to 90 million. 2) the operating profit margin is large-22.4ppt to 25.8%: mainly due to the management fee from + 29% to 36.33 million, and the impairment loss of new assets of RMB 25.04 million (+ 24% compared with the total impairment loss in the first half of the year).
The landing of the penalty and the extension of the validity of the resolution will help to raise expectations of asset restructuring. The company's merger and acquisition of Haike, a third-party payment company, was approved by the central bank in April this year, after it was suspended by the Anhui Provincial Securities Regulatory Bureau for investigation. At present, the company has received the punishment decision from Anhui Securities Supervision Bureau, and actively completed the rectification and reform. In addition, in order to ensure the smooth progress of this asset restructuring, the company's board of directors passed a resolution on October 20 to extend the validity of the restructuring transaction from November 8, 17 to November 8, 18, which will help boost market confidence in the company's completion of the acquisition.
At the end of the reduction, the holdings will be increased in front, and the uplink catalysis will be formed in the short term. The company announced at the beginning of the year that the total reduction of shareholders' planned holdings of no more than 4% expired on October 10. Looking forward: 1) Sony made a total commitment to increase its holdings by 150 million yuan in April / August this year (about 25 million yuan was completed on September 20); 2) in order to stimulate the enthusiasm of the management team, the company intends to launch an equity incentive plan. The source of the stock is to buy back 15.95 million shares (3.3% of the total share capital) through the secondary market. The increase in holdings and incentive plans help to demonstrate shareholder confidence and stimulate employee morale, and at the same time form a short-term upward catalysis for the company's share price.
Profit forecast
Due to the reduction in the growth rate of the main business and the increase in management fees, we have lowered our earnings per share forecast for 2017 and 2018 by 40% per share from RMB 0.24 / 0.36 to RMB 0.15 and RMB 0.29, respectively.
Valuation and suggestion
At present, the company's share price corresponds to 18e 46x Pram E. Maintain a neutral rating and raise the target price by 12% to 14 yuan as mergers and acquisitions boost expectations, which is 5.03% higher than the current share price.
Risk
The quality of loans deteriorated; the progress of asset restructuring fell short of expectations.
