Key points of investment
Matters: The company released its third quarter performance report. In the first three quarters of 2017, the company achieved operating income of 287 million yuan, an increase of 1.1% over the previous year, and achieved net profit of 33.99 million yuan, a year-on-year decrease of 30.56%. After deduction, the net profit of the mother was 41.31 million yuan, a decrease of 6.93% over the previous year.
Ping An's point of view:
Revenue remained stable, and land penalties affected net profit. The company's main business revenue in the first three quarters remained on par with the same period last year. The growth rate of the low-voltage circuit breaker industry gradually stabilized, and the company's revenue growth rate was in line with our expectations. Guimu's net profit declined sharply compared to last year, mainly due to the company's land default payment of 10.52 million yuan. The plot was originally planned to be used for the company's fund-raising projects “300,000 motors and 25 million pieces of molded products per year” and “R&D center construction project”, but after investigation, it was thought that the land was unsuitable for installing high-precision equipment, so the original plot was abandoned and the project was changed to the company's original factory area. The land return lost a total of 10.93 million yuan, which had a great impact on the company's net profit in the first three quarters. Net profit returned to the mother after deduction fluctuated slightly, which was relatively consistent with revenue growth.
The acquisition of Tianyi Shangjia is progressing smoothly. In September, Zhao Hanxin, the actual controllers of the listed company, Zhao Minhai's father and son, and company executives Shen Hua and Yu Xu, signed a “Concerted Action Agreement” to expand the share shares of the actual controllers and their co-actors. After the acquisition was completed, the shares of the actual controller and the controller of Tianyi Shangjiayuan and their respective concerted actors were 30.76% and 20.22% respectively, with no change in control. At the same time, important shareholders of both acquisitions promised to lock in for 5 years to ensure the long-term stability of the company. At present, the Securities Regulatory Commission has accepted the share acquisition, and follow-up work will be carried out in an orderly manner.
Tianyi Shangjia's performance is growing rapidly, and net profit in 2017 is expected to exceed performance promises. Tianyi Shangjia's 2017-2019 performance promises net profit of no less than 228 million yuan, 263 million yuan, and 303 million yuan after deduction. Compared with net profit of 197 million yuan in 2016, the performance promise is relatively steady. Tianyi Shangjia already achieved net profit of 94 million yuan from January to April 2017. We believe that the company's net profit this year will probably exceed performance promises, and Tianyi Shangjia will continue to grow rapidly.
Investment advice: Regardless of the completion of the acquisition and maintaining performance forecasts, we expect the company's net profit for 2017-2019 to be 6800, 80, and 90 million yuan respectively, and EPS of 0.46, 0.54, and 0.60 yuan respectively. The corresponding price-earnings ratios are 82, 70, and 62 times. Considering the completion of the acquisition, the company's stock capital for the exam was changed to 313 million shares. The company's net profit for the 2017-2019 exam is estimated to be 2.96, 343, and 393 million yuan, respectively. The corresponding price-earnings ratio is 39, 34, and 30 times. As a leading enterprise for core components in the low voltage circuit breaker industry, Xinhongtai will build the first high-speed rail brake pad brand after acquiring Tianyi Shangjia. The threshold for the high-speed rail brake pad industry is high, and there is plenty of room for import substitution. Tianyi Shangjia will take the lead in supplying China's standard EMU sets” “No.” brake pads, Future performance is guaranteed, and the “recommended” rating is maintained.
Risk warning: acquisition progress falls short of expectations; market competition intensifies; high-speed rail brake pad prices fall.