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The company released its results for the third quarter of 2017 on October 20. During the reporting period, the company achieved operating income of 1.763 billion yuan, an increase of 75.62% over the same period last year; net profit of 153 million yuan, an increase of 3.25% over the same period last year; Q3 single-quarter operating income of 633 million yuan, + 61.48% over the same period last year, and net profit of 51 million yuan, + 6.70% of the same period last year. In this regard, our comments are as follows:
Comments:
Business two-engine drive brings steady growth, and Q3 contributes to high growth in a single quarter. During the reporting period, the company's traditional main modified plastics business was booming in production and sales, and driven by Xingke Electronics into the statement, operating income soared (sales costs increased, resulting in operating costs + 71.79%, sales expenses + 55.62%). The increase in R & D investment brings management expenses + 54.33%, which is lower than the income growth rate. As a leader in the modified plastics industry, the company has always focused on capacity expansion and research and development, while ensuring profits through fine management and cost control. Q3's net profit in a single quarter grew by 6.70%, achieving a growth rate of 3.25% in the first three quarters. Compared with the half-yearly reported net return growth rate of 1.59%, the third quarter made a significant contribution to the annual performance.
Xingke Electronics set sail again, technical customers two major advantages to ensure the prospect. Xingke Electronics, a wholly-owned subsidiary of the company, is a full-process solution provider achieved by few enterprises in the field of CNC precision metal structures in China, with good customer relations and a sharp increase in performance year by year, which was included in the consolidated statement in March this year, significantly increasing the growth rate. Affected by Letv's problem, Xingke's performance declined from the end of last year to the beginning of this year compared with the same period last year. Xingke adjusted its strategy of binding major customers in time to reverse losses, and eliminated the dependence of key customers; and debt receivable with Letv was also resolved through "debt-to-equity swaps." At present, Xingke customers are well-known brand supply chain, the future performance still has huge room for growth.
Layout of lithium metal raw materials, new performance growth points can be expected. The company's recent layout of new energy lithium electricity upstream rare metal materials, frequent movements. In September, the company jointly funded the establishment of Jubilee Cobalt with Jia Jun and Zhang Zhiyi, and in October, signed a "strategic cooperation agreement" with Congo Huaxin to seek cobalt ore supply. At present, as a national strategy, new energy vehicles are expanding rapidly, and with the higher requirements for energy density of power lithium batteries, the demand for ternary materials will break out quickly, which is good for the upstream cobalt ore; in addition, the company has been deeply ploughing automotive modified plastics for many years. recent actions are conducive to infiltrating new energy vehicle customers and feeding traditional business. It is expected that there will be a certain synergy between new and old businesses in the long run, which will continue to improve the company's performance while following the trend of the automotive industry.
The company's LED and 3D printing business are growing steadily. Jubilee Optoelectronics, a subsidiary of the company's LED modified plastics business, entered the new third board in June last year, and its performance continued to grow at a high speed. At the same time, the company actively layout 3D printer business, the cauldron production line has been officially put into production, and constantly upgrade the technology to increase the efficiency of products. It can be predicted that in the next round of full industrialization of 3D printers, the company will usher in a new wave of profit growth.
Risk factors: 1) the risk of raw material supply and price change of modified plastics; 2) the risk of intensified competition in the product market; 3) the risk of not sustainable technological innovation.
Maintain a "buy" rating. We are optimistic about the steady development of the company's traditional business, Xingke Electronics' new order volume and its layout in the new energy industry chain, maintaining the company's annual EPS forecast of 0.41, 0.66 and 0.82 yuan respectively in 2017-18-19, maintaining the target price of 20 yuan, and maintaining the "buy" rating.
