Events:
The company released a third-quarter report that in the first three quarters of 2017, the company achieved operating income of 692 million yuan, an increase of 12.21% over the same period last year, and a net profit of 96.5337 million yuan, an increase of 1.94% over the same period last year. As a result, it is estimated that the company's Q3 realized operating income of 205 million yuan, down 7.66% from the same period last year, and its mother's net profit was 21.0579 million yuan, down 41.12% from the same period last year.
Comments:
The company's operating performance in the third quarter fell short of expectations, and we believe that the main reason is the rebound in international crude oil prices, driving up the cost of lubricating oil raw materials, base oils and additives, while the price sensitivity of raw materials in the domestic lubricating oil market is weak. it is difficult to pass on cost increases, so the company's third-quarter gross profit margin and net profit margin are about 1.5 percentage points lower than the semi-annual report. On the other hand, the third quarter should be the peak season of lubricating oil, and the company's sales revenue did not exceed the same period last year, the company's market development did not meet expectations.
Even though the company's operating performance in the third quarter is mediocre, we are still optimistic about it for a long time for the following main reasons:
1. The company is deeply engaged in the field of lubricating oil, and its output and quality are on a par with the first-tier brands. Lube oil private enterprises account for about 30% of the market share, but the product quality is uneven. Most manufacturers are small factories producing in OEM/ODM mode, do not form their own brand, and can only survive in the market through price war. The company's products take the high-end line, have their own brands, high gross profit margin, and have a good basis for expanding market share.
two。 The company's competitive concept is "the countryside surrounds the city". At present, the company's sales market is mainly concentrated in third-and fourth-tier cities, and gradually expand to more than second-tier cities. There are two reasons: first, the market structure of lubricating oil in big cities is relatively stable, which is basically occupied by high-end foreign lubricants and state-owned brands "Great Wall" and "Kunlun". A long-term cooperative relationship has been formed between manufacturers and suppliers, and the space for small brands to expand is limited; second, the company's sales focus is on the transportation hub, while the traffic of road transport is often located in third-and fourth-tier cities. The company does not blindly participate in the high-end market competition, the entry point is suitable for the current development situation.
3. The proportion of automotive lubricating oil is increasing, and the number of passenger cars is expanding. The competition center of the company lies in the automobile aftermarket, and the market size mainly depends on the growth of car ownership. At present, the growth rate of passenger car ownership in China is more than 15%, and there is still a gap of about 4 times between the number of thousands of people and Europe, the United States, Japan and other developed countries, so the company's market development space is very broad.
The company's new plant was officially put into production in the second half of the year, and the new capacity has been put into use. at present, there is no capacity bottleneck.
The fourth quarter is the peak season for the sales of antifreeze, another major product of the company, which will bring some performance support to the company. From 2017 to 2019, EPS is expected to be 0.71,0.85,0.97 yuan per share, corresponding to PE 33x, 28x, 24x, maintaining the "buy" rating.
Risk hint: the price of raw materials is rising and the market penetration of products is not up to expectations.
