Main points of investment
Event: the company released its quarterly report for 2017. From January to September, the company achieved operating income of 9.015 billion yuan, an increase of 813.58% over the same period last year, and a net profit of 206 million yuan, an increase of 468.82% over the same period last year. Among them, the company's operating income in the third quarter was 2.038 billion yuan, an increase of 367.72% over the same period last year, and the net profit was 115 million yuan, an increase of 460.01% over the same period last year. The main reasons for the performance changes are as follows: after the restructuring of the company and China Electric Power, the overall integration is good, the total volume of business is increasing, and the profitability is enhanced.
The company announced a pre-increase in 2017 results: 270 million yuan-350 million yuan.
The accounting change was approved. The company passed the bill on the change of accounting estimates on October 26th. Assuming that the accounting estimate has been applied on September 30, the company's net profit from January to September 2017 will be affected by 95.71 million yuan.
By the end of June 2017, the company had an order of 18.3 billion yuan. We judge that the company's orders ensure rapid growth this year and next year.
China Motor Power achieved high growth in the first half of the year: its operating income in the first half of 2017 was 5.781 billion yuan, an increase of 153.92 percent over the same period last year, and its net profit was 247 million yuan, an increase of 54.97 percent over the same period last year. A number of business lines have achieved rapid development.
The non-public offering progressed smoothly: the company promoted the implementation of Yumen Xinneng Solar and Thermal first Power Co., Ltd., raised no more than 1.572 billion yuan by non-public offering shares, and invested in a 50, 000-kilowatt photothermal power generation project of secondary reflection molten salt tower. At present, the administrative license application materials submitted by the company have been accepted by the China Securities Regulatory Commission.
The company and Zhejiang Gold Trust signed a strategic cooperation framework agreement on May 5, 2017. From April 6 to April 14, Zhejiang Gold Trust increased its stake in the company by 36788143 shares, accounting for 5.00% of the company's total share capital, which is equivalent to the upgrading of Zhejiang Gold Trust from "financial investor" to "strategic investor".
Clean energy: the company acquires China Electric Power to enter the field of electric power EPC, and the synergy effect promotes growth. In 2016, the company completed 2.9 billion cash acquisition of 80% stake in China Machinery Power, and the payment was completed after the performance was achieved in five phases.
China Electric Power: power Engineering EPC ranks among the top 5 in China. After holding CNPC Power, power engineering, new energy and clean energy general contract business have become the core pillars of the company. China Electric Power has promised that the deduction of non-net profit from 2017 to 2019 will not be less than 376 million, 415 million and 456 million yuan.
Civil-military integration: it is expected to become a bright spot for the company's future growth. In 2016, the company has acquired a 60% stake in Wuxi Hongqi Shipyard (one of the professional production bases of the former General equipment Department). The company has also invested in the establishment of Jiangsu Chuanhai Defense Emergency Engineering and Technology Research Institute, which will enhance the company's research and development capabilities in the fields of dual-use emergency equipment, high-tech ships and high-end marine equipment.
Traditional business: coal chemical equipment bottomed out and rebounded, nuclear power, new materials trend upward. Recently, the coal chemical and petrochemical industries have warmed up, and the company's orders for coal chemical equipment and petrochemical equipment have begun to recover. It is expected that the company's traditional business will turn into a profit in 2017. The improved T-SEC coal efficient clean energy technology has great advantages in environmental protection and has a good market prospect in the future. Nuclear power equipment: the establishment of the Nuclear Physics Research Institute, which is China's first industrial and commercial approval of the Nuclear Physics Research Institute established by a private listed company, has been qualified as a supplier.
Taking into account the acquisition of China Machinery Power, the company's performance in 2017-2019 is expected to be 320 million yuan, 470 million yuan, 620 million yuan, the current market capitalization of about 7.1 billion, corresponding to PE is 22-15-11 times, maintaining the "buy" rating.
Risk tips: the risk of bad debts of accounts receivable, the decline risk of traditional business demand such as coal chemical / petrochemical equipment, the risk of transformation of military industrialization, and the risk of order execution of China Electric Power.
