Main points of investment:
Event: on the evening of February 6, the company released the 2017 results KuaiBao and 2018Q1 performance forecast.
In 2017, the company achieved operating income of 5.087 billion yuan, an increase of 137.69% over the same period last year, and a net profit of 135 million, an increase of 355.97% over the same period last year. The main reason for achieving high growth is that Runxing Technology began to merge in October 2017.
2018Q1, the company expects to make a profit of 143 million yuan to 157 million yuan, an increase of 2,500% over the same period last year.
The performance is in line with expectations and is optimistic about the high growth for the whole of 2018. After the successful acquisition of Runxing Technology, the company has entered the high-end CNC machine tool manufacturing industry. Runxing Technology has strong competitiveness in the CNC industry, and downstream customers include domestic well-known consumer electronic structure foundry. As its 2017Q4 begins to consolidate, we expect its actual full-year operating net profit in 2017 to exceed the acquisition commitment of 250 million yuan. Looking forward to 2018, the company still has a high growth momentum driven by the confirmation of some equipment carryover, the stable 3C structure processing market and vertical machining centers in the general industrial sector.
The 3C industrial chain may be adjusted in 2018, and we are not pessimistic about the growth of CNC demand. Affected by the negative factors of the 3C industry chain at the beginning of 2017Q4 (the decline in domestic smartphone shipments and the lower-than-expected sales of iPhone X led to the substantial reduction of 2018Q1 orders), the market is more worried about the decline in demand in the 3C structure processing market. We believe that the short-term negative sentiment may be magnified and the market demand for CNC remains stable under the background of the share adjustment of various manufacturers. We expect that the order volume of Fanake CNC equipment, the leader of the industry, is still tight in 2018, and the overall demand for domestic CNC equipment is not great.
Runxing Technology has sufficient orders on hand, and the continuous expansion of production capacity indicates that high growth is expected in 2018. Due to the good order situation in 2017, Runxing has greatly expanded its production capacity, from about 500 units per month at the beginning of the year to more than 1000 units per month, and the production capacity of different types of models has been expanded. we expect the company to gradually get rid of the over-reliance on the sales of equipment in small drilling centers, and we may see sales of products such as vertical machining centers in 2018.
Profit forecast and valuation. According to the latest financial data disclosed by the company, we have adjusted our profit forecast slightly. We estimate that the operating income of the company from 2017 to 2019 will be 50.70, 7500 and 9.15 billion yuan, respectively, and the net profit will be 1.26, 549 and 659 million, respectively, and the corresponding EPS will be 0.120.54, 0.65. With reference to comparable company valuations, we give the company 25 times PE in 2018, corresponding to a target price of 13.50 yuan, maintaining a "buy" rating.
Risk hint. Macroeconomic downturn; sales of CNC equipment fell short of expectations.