Brief comment on performance
Lucky Film disclosed its results in the third quarter of 2017: the company achieved operating income of 1.423 billion yuan in the first three quarters of 2017, + 34.55% year on year, and net profit of 70 million yuan, + 67.86% compared with the same period last year. The company's performance has achieved rapid growth since the beginning of this year and continues to exceed market expectations.
Business analysis
The performance achieved eye-catching growth, and the operating capacity continued to improve: in the first three quarters of 2017, the company achieved an eye-catching growth of + 34.55% in revenue and + 67.86% in net profit, mainly due to the year-on-year increase in sales of color photographic paper and solar back panels. During the reporting period, the company's operating capacity continued to improve. On the premise of ensuring the level of R & D expenses, various expenses were properly controlled, and the rate of management expenses and sales expenses decreased in the first three quarters compared with the same period last year-0.33ppt and-0.51ppt. In the first three quarters, the company achieved a gross profit margin of 18.06% and a net profit margin of 5.17%, which were + 0.74ppt and + 0.92ppt respectively compared with the same period last year.
Strengthen the industrial layout of new energy and new materials, and accelerate the lithium battery business: in order to speed up the strategic layout in the field of new energy and new materials, and further expand the lithium battery business, the company plans to change the fund-raising project "Lithium diaphragm coating production Line Phase II Project" to "Lithium Ion Battery soft package Aluminum-plastic Composite Film industrialization Construction Project". Six production lines (including 1 aluminum foil cleaning line, 1 surface treatment line, 1 aluminum-plastic film dry composite line, 1 aluminum-plastic film cutting line and 2 post-finishing packaging lines) will be built, and the total production capacity will reach 1200 million square meters per year. According to the forecast of Gao Gong Lithium, the domestic demand for aluminum-plastic film will reach 158.67 million square meters by 2020, with a total market size of 9 billion yuan. In addition, the company's proposed acquisition of lithium battery diaphragm leader Zhongke Science and Technology achieved an operating income of 253 million yuan and a net profit of 29 million yuan in 2016. the completion of the acquisition will bring the company a total capacity of 220 million square meters of dry and wet production line and 80 million square meters of coating line. At present, the two lithium battery diaphragm production lines raised and built by the company have successfully completed the chemical commissioning and achieved temporary conversion. We expect to enter the normal production state in the fourth quarter, with a profit of 6107 million yuan / year before full production.
The company is an important platform for civil-military integration of the Aerospace Science and Technology Group, and will benefit from the Hebei Aerospace Industry Group: the company is an important layout platform for new energy and new materials under the Aerospace Science and Technology Group. in-depth cooperation with other scientific research institutes of the group in lithium battery separator, photovoltaic backplane and other business. In addition, the company is located in Baoding, Hebei Province, located in the coordinated development area of Beijing, Tianjin and Hebei, adjacent to the Gu'an Aerospace Industry Group, and will directly benefit from the radiation effect of the joint development of other industries of the Group in the future. According to the description of the No. 1 document of the Aerospace Science and Technology Group in 2013, we judge that the company is expected to become the focus of the group's military industrial resources integration.
Profit forecast and investment suggestion
The company spun off the traditional film business in 2012 and gradually formed the three major business layouts of image materials, photovoltaic materials and lithium materials. It is an important new material development subsidiary of Lucky Group. We believe that the company's lithium battery business layout is strengthened, mass production is imminent, photovoltaic materials business is rising with the industry, image materials business is becoming increasingly sound, will provide a strong performance support for the company. In addition, the company is located in the hinterland of the Beijing-Tianjin-Bao Triangle and is expected to directly benefit from the Gu'an Aerospace Industry Park and the coordinated development strategy of Beijing-Tianjin-Hebei and become the focus of the group's military industrial resources integration.
We are optimistic about the improvement of profitability brought about by the company's business transformation and effective cost control, and raise our profit forecast for the company. We do not consider the increased performance brought by China Science and Technology for the time being. It is estimated that the company's operating income in 2017-2019 is RMB 19.29max, an increase of 35.7%, 24.8% and 19.3% over the same period last year. The net profit at home is RMB 0.81 and 1.15 billion, an increase of 95.8%, 42.8% and 30.6%, respectively. We believe that the company has a clear expectation of future performance growth, and is expected to benefit from the reform process of the Aerospace Science and Technology Group, maintaining the "buy" rating of the company, with a target price of 20 yuan for 6-12 months.
Risk hint
The production of lithium battery diaphragm project is not as expected; the growth rate of photovoltaic industry is not as expected; the market scale of traditional photosensitive materials and image materials is greatly reduced; and the process of asset integration is not as expected.