Main points of investment:
The layout of "one point and three lines" has achieved remarkable results, and the company's performance has increased significantly. The company relies on the "leading innovation" model to achieve differential competition, and has become one of the top 50 construction machinery enterprises and the top 20 excavator enterprises in the world; in October 2016, the company also listed AVmax, a Canadian airline, with a strategic layout in the field of aviation equipment, forming a "1.3 line" overall business pattern, that is, focusing on equipment manufacturing, engineering equipment, special equipment and aviation equipment flying together. Benefited from the warming of construction machinery and the first three quarters of AVmax,2017, the company realized operating income of 2.585 billion yuan, an increase of 117.97% over the same period last year, and a net profit of 114 million yuan, an increase of 231.52% over the same period last year.
Industry recovery + focus on core business, construction machinery performance inflection point approaching. The core products of the company's construction machinery business are piling machinery and excavation machinery. under the background of the recovery of the industry, the two major businesses have ushered in a significant recovery; at the same time, the company continues to deepen the business layout. on the one hand, it has set up a joint venture company, China Tieshan River, to cut into the Changsha urban rail market, and has received an order of 600 million yuan for shield machine. On the other hand, the company focuses on core business, the market share of rotary drilling rigs continues to increase, and energy-saving large and medium-sized hybrid excavators achieve technological innovation and quality upgrading; with the continuous strengthening of Matthew effect in the industry, the company can not only further improve gross profit margin through economies of scale, but also achieve product differentiation competition and expand market share in subdivided areas.
With obvious technological advantages, the special equipment business is expected to become a bright spot of performance growth. The company's special clothing products mainly include a certain type of armored vehicles, 8-ton small digging, automatic mine removal vehicles and other products; in terms of military products, the company has cooperated with the military for ten years and has a solid foundation for cooperation. The revenue of the company's special equipment business in the first half of 2017 was 49 million yuan, an increase of 453% over the same period last year. We believe that the company's technical strength in the field of special equipment has been fully recognized by the industry, and its performance is expected to continue in the future.
Aircraft passengers change cargo + navigable two-wheel drive, aviation equipment business is expected to continue to grow. From the performance point of view, Avmax is the top quality target in the global aircraft aftermarket, with a net profit of 206 million yuan from September 2015 to June 2016. According to the performance bet agreement, the annual performance bet limit for AVmax2016-2018 is 230 million yuan, which is expected to significantly increase the company's performance in the future. From a strategic point of view, after the completion of the acquisition of AVmax, the company will lay the road to industrial upgrading-entering the domestic civil aviation market, in which the core focus is reflected in two aspects: one is the aircraft passenger cargo conversion business, which is expected to benefit from the improvement of the industry prosperity; the second is to cooperate with the original subsidiaries to lay out the navigation industry chain, which will provide good flexibility for performance growth.
Maintain the company's "buy" rating. Based on the principle of prudence, we analyze the company's acquisition of the remaining 26.67% of AVmax shares in two situations: first, regardless of the company's acquisition of the remaining 26.67% equity of AVmax, the company's net profit from 2017 to 2019 is expected to be 164,369,451 million yuan, and the corresponding EPS is 0.16,0.35,0.43 yuan per share respectively. Second, assuming that the company acquires AVmax13.33% shares in 2017 and early 2019 respectively, the company's net profit for 2018-2019 is expected to be 164,404 million yuan and 531 million yuan, respectively, and the corresponding EPS is 0.16,0.38,0.50 yuan per share respectively. According to the latest closing price of 7.31yuan, the corresponding PE is 47,19,15 times respectively. We are optimistic about the development prospects of the company under the "1.3 line" layout, and continue to maintain the "buy" rating.
Risk hints: construction machinery performance continues to decline sharply and military business development falls short of expectations; non-operating income falls short of expectations; policies related to the navigation industry fail to advance as expected; AVmax operating performance drops sharply; AVmax and its synergy is lower than expected risk; uncertainty risk of AVmax's remaining 26.67% equity acquisition.
