occurrences
The company released its 2017 annual report
According to Lanhai Huateng's 2017 annual report, the company achieved operating income of 578 million yuan in 2017, a decrease of 14.58% over the previous year; net profit attributable to listed companies was 128 million yuan, a decrease of 17.39% over the previous year; net profit after deducting non-return mothers was 114 million yuan, a decrease of 24.91% over the previous year; and basic earnings per share were 0.62 yuan, a decrease of 22.50% over the previous year.
Brief review
Profitability has declined markedly, three fees have risen, and operating efficiency has declined
The company's return on net assets (diluted) in 2017 was 18.15%, down 7.32 pct from 25.47% in 2016, and overall profitability declined. From the perspective of the three major expenses, the company's sales expenses accounted for 7.99% of total revenue in 2017, an increase of 0.77 pcts compared to 2016, mainly an increase in sales-related miscellaneous expenses; the company's management expenses accounted for 12.10% of total revenue, an increase of 2.25 pcts compared to 2016, mainly an increase in the remuneration of the company's employees; the company's financial expenses accounted for -0.29% of total revenue, which is relatively stable. Considering the 14.58% drop in the company's total revenue, we think the company's overall operating efficiency has declined.
Short-term revenue from the electronic control business declined, and industry support is expected to develop steadily over the long term
During the reporting period, the company's electronic control business achieved revenue of 448 million yuan, a year-on-year decrease of 19.21%, accounting for 77.42% of the company's total annual revenue. Gross margin was 38.60%, down 6.28% year on year. Taken together, due to the country's adjustment of the NEV subsidy policy in 2017, the unit price of the company's products declined as a result of declining subsidies. Coupled with the impact of factors such as the review of the subsidy catalogue, the “30,000 kilometer” application subsidy limit, the re-evaluation of management entry standards, the current high penetration rate of company customers (buses, logistics vehicles), overall demand fell short of expectations in the short term, and increased competition in the motor and electronic control industry, the company's electronic control business performance declined markedly. Only 59,178 units were sold in 2017, down 15.49% from the previous year. However, in the long run, the NEV industry has clear policy support, and the company's electronic control business is expected to maintain steady growth in the future.
Medium and low voltage inverter business revenue continues to grow steadily
Affected by the recovery and continued improvement of the industrial automation control industry, during the reporting period, the company's medium and low voltage inverter business achieved revenue of 112 million yuan, an increase of 15.01% over the previous year, accounting for 19.45% of the company's total annual revenue. The company achieved sales volume of 62,433 units, an increase of 23.32% over the previous year. Gross margin was 42.01%, down 0.91% year on year. During the reporting period, the company launched a new VA series spindle servo driver. Using a method with high analytical accuracy, combined with a high-performance synchronous electric spindle, it can achieve a speed regulation ratio of over 100000:1. This series of products is expected to be applied on a large scale in the market.
Focus on the essence, and focusing on R&D is expected to achieve thick and thin hair
The company has R&D spiritual DNA. As of December 31, 2017, the proportion of the company's R&D technicians in the total number of employees reached 42.48%. From the perspective of R&D expenditure, during the reporting period, the company invested 498.88 million yuan in R&D expenses, accounting for 8.61% of operating income (R&D expenditure in 2015 accounted for 11.12% of the company's total revenue, and R&D expenditure in 2015 accounted for 7.23% of the company's total revenue). Judging from the R&D output results, the company obtained 9 new patents in 2017 (including 1 invention patent). By the end of 2017, the company had obtained a total of 48 patents (including 4 invention patents). We believe that the company's emphasis on product technology research and development will effectively enhance the competitiveness of the company's products, and its technological breakthroughs will help the company's performance to grow.
Profit forecast and investment rating: We expect the company's EPS for 2018 and 2019 to be 0.92 yuan and 1.12 yuan respectively, and the corresponding price-earnings ratios are 18 times and 15 times, respectively. Give it an “increase in holdings” rating.