Main points of investment
The transformation performance of the beneficiary industry has greatly increased, which is in line with our expectations. The company's 2017Q1-Q3 realized income / operating profit / net profit of 164 million / 48 million / 41 million yuan, an increase of 46.22%, 71.01% and 55.26% over the same period last year, deducting non-year-on-year growth of 71.54%, basic EPS0.88 yuan, and operating cash flow of 53.46 million yuan, an increase of 658% over the same period last year, which is in line with our expectations. Among them, Q3's single-quarter income / return net profit was 74.73 million / 21.12 million yuan, an increase of 59.14% and 97.15% over the same period last year. The month-on-month growth of H1 was mainly due to the strong demand for the diamond line and the substantial increase in product sales.
The scale effect appears and the profitability increases. The company's 2017H1 comprehensive gross margin / net profit margin is 47.15% Universe 24.98%, year-on-year-2.40/+1.45pcts. The decline in gross profit margin is mainly due to the increase in the cost of raw materials, but we judge that with the wide application of polysilicon to the diamond line, short-term supply in short term will lead to a rise in prices, and the gross profit margin is expected to pick up. The company's sales / management / financial expense rate is 3.68%, 12.50% and 0.05%, respectively, compared with the same period last year. It can be seen that with the increase in size, the company's various expense rates have decreased significantly, thus the net interest rate has increased. It is expected that the effect of subsequent scale expansion will be gradually enhanced, and the company's profitability is expected to continue to improve.
The capacity of raising and putting into production has been released one after another, and considerable profits have been made under the supply gap. The company's IPO investment project is the "construction project with an annual output of 1 million km diamond wire saw". Three quarterly reports show that the project under construction has reached 11.09 million yuan, an increase of 582% over the same period last year, indicating that the company is continuing to expand production, and the company's current assets of 124 million yuan show that the company is well prepared for subsequent production expansion. We judge that under the trend of the full conversion of polysilicon chips to the use of diamond line, the supply gap is huge, and the release of production capacity brings performance elasticity. In addition, the new production capacity of the construction project is 0.06mm-0.45mm electroplating diamond line, which is mainly ultra-fine line, using a new self-developed production line, with strong market competitiveness. We expect that the annual production capacity in 2017 will reach 1.47 million km/ years, the sales contribution income / net profit is about 1 million km / net profit is about 280.58 million yuan, the 2018 production capacity is expected to reach 3 million km/ years, and the sales contribution income / net profit is about 590 million / 111 million yuan.
Continue to make progress in research and development to create lasting core competitiveness. Forward-looking product development and innovation is the basis for the company to achieve long-term sustainable development. 2017H1 invested 5.33 million yuan in R & D expenses, an increase of 34% over the same period last year, and accumulated 40 / 7 authorized patents / newly applied patents (including 8 / 6 invention patents). The development of key new products such as grinding wheels, slicing knives and CMP-DISK has been steadily advanced, and some products have made phased breakthroughs. Including the Diamond Line, the company has always been in the forefront of industry development by relying on independent research and development. Research and development of genes is not only the core competitiveness of the company, but also the cornerstone of sustained growth.
Risk factors: photovoltaic industry diamond line replacement speed is not up to expectations, industrial policy changes, and so on.
Profit forecast and valuation. The company is the leader of domestic diamond tools, diamond cutting industry to take advantage of photovoltaic technological innovation Dongfeng high-speed growth, the company's IPO production capacity of 2017 capacity, huge performance flexibility. We raise the company's performance forecast for 2017-19 net profit of 66 million / 124 million / 145 million yuan (the original forecast is 65 million / 94 million / 110 million yuan), the 3-year CAGR is 56%, the basic EPS is 1.26 / 2.39 EPS 2.79 yuan (the original value is 1.26 shock 1.80 shock 2.12 yuan), corresponding to PE is 58-31-26 times, we are optimistic about the company's new business leading value, give the company 2018 37XPE Corresponding to the target price of 88.40 yuan, maintain the "buy" rating.