Events:

The company released its quarterly report for 2017. during the reporting period, the operating income was 13.623 billion yuan, an increase of 18.12% over the same period last year. The net profit belonging to shareholders of listed companies was 381 million yuan, an increase of 80.26% over the same period last year. The net profit after deduction belonging to shareholders of listed companies was 381 million yuan, an increase of 84.35% over the same period last year, and EPS 0.17 yuan. Of this total, Q3 realized a net profit of 142 million yuan, an increase of 34.68% over the same period last year and 14.37% month-on-month.

At the same time, the company expects to achieve a net profit range of 421.8 million yuan to 499.8 million yuan for shareholders of listed companies in 2017, an increase of 14.61% to 35.80% over the same period last year, and an estimated Q4 performance range of 0.408 to 1.188 million yuan.

Comments:

1. Gross profit margin is slightly higher than the previous month, expenses are stable, and profits are improved quarter by quarter.

In the first three quarters of 2017, the company achieved operating income of 13.623 billion yuan, an increase of 18.12% over the same period last year, of which Q3 realized operating income of 4.686 billion yuan, down 25.24% from the same period last year and an increase of 4.02% over the previous month. The net profit attributed to shareholders of listed companies was 381 million yuan, an increase of 80.26% over the same period last year, and the net profit after deduction belonging to shareholders of listed companies was 381 million yuan, an increase of 84.35% over the same period last year and 0.17 yuan for EPS. Of this total, Q3 realized a net profit of 142 million yuan, an increase of 34.68% over the same period last year and 14.37% month-on-month growth.

During the reporting period, the company's sales gross profit margin was 4.38%, a year-on-year decline of 0.16pct, and the decline was mainly due to two main reasons: on the one hand, the proportion of revenue from oil products trade and rubber trade with lower gross profit margin increased significantly during the reporting period; on the other hand, the company's gross profit margin (except rubber trade) declined in varying degrees.

During the reporting period, the company's net sales profit rate was 3.04%, which was higher than the same period last year. When the gross profit margin decreased 0.16pct, the net profit rate increased mainly from two aspects. On the one hand, the expense rate decreased 0.11pct during the company period, on the other hand, the company lost 99.22 million yuan on investment income in the same period last year, mainly due to the loss of the associated company Huayu Natural Gas. At the end of February this year, the company sold it. Therefore, the company's investment income lost only 3.31 million yuan in the first three quarters of this year.

During the reporting period, the company's financial expenses decreased significantly, from 4.3789 million yuan to-7.1534 million yuan, mainly due to exchange gains brought about by RMB appreciation; the company's management expenses remained stable on the whole; and the company's sales expenses reached 18.0574 million yuan, an increase of 56.17% over the same period last year, mainly due to the increase in freight brought about by the company's business growth.

2. Through asset exchange, the company creates a two-wheel drive development strategy of "energy + finance".

In 2015, by selling its former agrochemical business to Guangdong Huaxin, the company spun off all its previously volatile chemical assets, and then gradually injected financial businesses such as energy trade and commercial factoring into the company's "energy + finance" two-wheel drive development strategy. in the future, the company will comprehensively develop its existing energy and financial business, while actively looking for extension development opportunities in the energy and financial sectors.

At present, the company's energy sector business mainly includes oil products trade and rubber trade, which is mainly the oil products entrepot trade business of Hong Kong natural gas of the company's wholly-owned grandson company and the oil products business of Fujian Huaxin, a wholly-owned subsidiary; with the help of the relevant resources of the company's energy business, the company makes great efforts to develop rubber domestic trade business, while the company carries out energy and chemical industry product trading service business through Yangpu International Energy Trading Center.

At present, the factoring business carried out by Shanghai factoring, the main wholly-owned subsidiary of the company's financial business, focuses on the petrochemical industry chain, forms a good cooperative relationship with many domestic financial institutions, and broadens the company's financing channels.

We are optimistic about the company's strategic development model of "energy + finance". The energy industry is large in scale, and the company relies on Huaxin Group, which is rich in energy resources and provides strong support for the development of the company's energy business. the energy industry is a capital-intensive industry with many financing needs, and the company has a large market demand for commercial factoring and has a bigger and stronger industrial foundation.

3. Investment suggestions

The company's net profit for 2017-2019 is expected to be 4.60,4.89 and 547 million yuan, respectively, and the corresponding EPS is 0.20,0.21 and 0.23 yuan respectively. The current share price is 8.40yuan, and the corresponding PE is 43.0,40.4 and 36.2 times, respectively.

Risk hint: RMB exchange rate fluctuates greatly, and the price of energy and chemical products fluctuates greatly.