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According to the company's announcement for three quarters on October 31, 2017, Q1-Q3 companies achieved operating income of 209 million yuan in 2017, an increase of 20.33% over the same period last year, and a net profit of 24 million yuan, down 2.10% from the same period last year. Of this total, Q3 achieved an operating income of 73 million yuan in a single quarter, an increase of 17.56% over the same period last year, and a net profit of 6 million yuan, an increase of 2.51% over the same period last year.
Main points of investment:
Profitability has recovered and gross profit margin continues to rise. Q3 single-quarter overall gross profit margin of 33.92%, up 1.21 percentage points from Q2, the company's gross profit margin has rebounded for three consecutive quarters so far this year. The main reason for the decline in Q3 net profit growth compared with Q2 is the sharp increase in financial expenses.
Continuous signing of large orders in India, overseas business development has achieved remarkable results. On August 15, 2017, the company announced that it signed a contract for India's FFC flood control irrigation project with Navayuga Engineering Co., Ltd., with a total price of US $2685. On September 29, 2017, the company again announced that it had signed a contract with RVR Engineering Co., Ltd. for the Chintalapudi II irrigation water lifting project in India, with a total price of US $1070. The company has continuously won orders for water conservancy projects in India, which shows that the company has made substantial progress in expanding the water conservancy market in India. We believe that as the company focuses on the overseas market, especially the Indian market, the continuous signing of large and medium-sized customized motor business will be conducive to the growth of the company's traditional large and medium-sized customized motor business.
The wind power industry will see a rebound in prosperity next year, and the company's wind turbine business is expected to become a new driving force for performance growth. As the abandonment rate of four of the "Red six provinces" that were suspended for new installations in the first half of 2017 fell below the red line, there is a high probability that new wind power installations will be restarted next year. The wind power industry is expected to rebound under the dual factors of the resumption of new installations in the north and the improvement of delivery delays in the south. The company has made great efforts to develop wind turbine business this year, and has developed new customers such as Mingyang, Vision and Fengdian, which is expected to become a new driving force for performance growth next year.
Profit forecast: the company's semi-annual report in 2017 put forward a high transfer plan of 10% increase in capital reserve. Taking into account the company's leading position in large and medium-sized customized generators, the steady expansion of wind turbine business and the successful development of overseas markets such as India, we expect the company's EPS to be 0.413, 0.509 and 0.549 yuan respectively in 2017, 2018 and 2019, continuing to maintain its "prudent recommended" investment rating.
Risk tips: the demand for large and medium-sized electrical machines is shrinking rapidly; the demand for wind turbines is shrinking faster than expected; and the settlement progress of water conservancy projects in India is lower than expected.