Main points of investment

The demand of the container industry is improving, and the revenue maintained rapid growth in the third quarter, and the volume and price of the container floor continued to rise: during the period, the company achieved operating income of 1.279 billion yuan, an increase of 30.66% over the same period last year. Benefiting from the warming of container manufacturing and the strong demand for soleplate, the company adjusts the production line accordingly to increase the capacity release of container soleplate, and the production and sales of soleplate are booming, volume and price are both rising; during the period, the company's new bamboo-wood composite floor production line has been put into production, with the new production capacity gradually put into operation, Q4 revenue is expected to maintain a strong growth trend. From a quarterly point of view, the company's Q1-Q3 achieved revenue of 314 million yuan, 418 million yuan and 547 million yuan respectively, up-9.44% (with a high base in the first quarter of the same period last year), 53.04% and 52.5% Q3 revenue continued the rapid growth momentum of Q2 quarter.

The overall gross profit margin is flat compared with the same period last year, and the lower gross profit margin of Xinhua Chang business with lower gross profit margin is expected to remain stable in Q3 overall plate business. During the period, the company achieved a gross profit margin of 39.92%, which was basically the same as that of the same period last year. From a quarterly point of view, the company's Q1-Q3 gross profit margin was 42.39%, 46.93% and 33.15% respectively, down 6.24% and 13.77% respectively compared with the same period last year. The decline in gross profit margin in the third quarter was mainly affected by the consolidation of Xinhuachang. Because of the high purchasing cost of raw materials and other reasons, the gross profit margin of New Huachang Wood is quite different from that of Kangxin new materials. We expect the gross profit margin of the company's floor to remain stable compared with Q2. Since the third quarter of last year, with the recovery of demand for the backplane, the gross profit margin of the backplane has shown a trend of improvement quarter by quarter. This year, the demand for container manufacturing continues to rise, the floor business is close to full production and sales, the price is significantly higher than the same period last year, and the gross profit margin is significantly higher than the same period last year.

The increase of freight for container floor sales and the increase of maintenance costs for forest resources have led to an increase in the rate of sales and management expenses. The company's expense rate during the period was 15.31%, an increase of 4.26 percentage points over the same period last year.

Among them: the sales expense rate was 4.86%, up 1.63% from the same period last year, mainly due to the substantial increase in shipping charges brought about by the increase in container floor sales; the management expense rate was 8.24%, an increase of 2.87% over the same period last year, mainly due to the increase in forest resources management and protection expenses; from a quarterly perspective, the 2017Q3 expense rate was 14.83%, which was 5.9% lower than that of Q2.

The year-on-year decline in net operating cash flow is mainly due to increased raw material acquisitions and reserves this year: the company's net operating cash flow during the period was 15.42 million yuan, a slight improvement over the same period last year, tax rebates and an increase in short-term loans during the main period. In addition, the increase in sales and the consolidation of Xinhuanchang led to an increase in accounts receivable, with the balance of accounts receivable at the end of the period reaching 480 million yuan, an increase of 240 million yuan over the beginning of the year.

Profit forecast and valuation: the rebound in container manufacturing has led to strong demand for the floor, and the company has benefited significantly as a leader in the industry. At the same time, with the gradual release of the company's new container floor project capacity, the production scale is expected to further expand; the future capacity release superimposed Xinhuachang Group customer incremental expansion is expected to drive the company's sustained and rapid expansion. In addition, the company is also actively layout the wooden structure housing market, the cost advantage is expected to help the market expansion, the future development is worth looking forward to. We estimate that the company's EPS will be 0.48,0.60,0.79 yuan respectively from 2017 to 2019, and the current share price will be 21, 17 and 13 times the PE respectively. Give a "buy" rating.

Risk hint: the container manufacturing boom has fallen sharply, and business expansion is lower than expected.