The consolidated results led to increased profits, and the full-year performance fell short of expectations
On the evening of April 18, the company announced its annual performance report. The revenue for 2017 was 303 million yuan, an increase of 38.24% over the same period of the previous year; net profit attributable to owners of the parent company was 20.89 million yuan, an increase of 28.98% over the same period of the previous year; basic earnings per share were 0.21 yuan, an increase of 10.53% over the same period of the previous year, with a proposed 10 distribution of 0.32 yuan. The main reasons are: profit growth brought about by the company's revenue increase in 2017; national regulations became stricter, demand for environmental treatment in the rubber tire industry increased, and the company won bids for a number of exhaust gas treatment projects; the company completed asset delivery and began consolidation to meet performance promises; and the company's 2017 government subsidy, which included current profit and loss, was 2.03 million yuan. Excluding net profit, 9.52 million yuan came from the influence of the subsidiary Qingtou Intelligence merger. The company's performance fell short of our expectations. Considering the company's two business collaborations and future mergers and acquisitions expectations, the “buy” rating was maintained.
The main business is still in the recovery stage, and the auxiliary equipment system has declined
The company's main business is intelligent conveying and batching systems. The main products include auxiliary machine systems, small ingredient weighing systems, and pneumatic conveying systems. In 2017, the revenue of auxiliary systems fell from 78.67 million in 2016 to 54.53 million in 2017. The gross margin was relatively stable at 35.28%. Gross profit fell from 26.47 million to 19.24 million, which dragged down net profit to a certain extent. The revenue and gross margin of the weighing system for small ingredients and the pneumatic conveying system remained relatively stable, basically the same as last year. We believe that the tire and rubber industry where the company is located is still in the recovery stage, and the current level of prosperity is not high. The environmental protection system achieved revenue of 106 million yuan this year, which is in line with our expectations and has become another pillar of the company's business.
Mergers and acquisitions have been implemented and mergers have begun, and performance is expected to achieve high growth
The acquisition of Qingtou Intelligence for the company's major asset restructuring project was approved by the China Securities Regulatory Commission. Delivery and business change registration were completed during the reporting period. The results from December 19, 2017 to December 31, 2017 were incorporated into the company's consolidated report, bringing revenue and profit growth to the company. Former shareholders Wang Zhan and Chuangzhi Tianxia promised that Qingtou Intelligence promised net profit of 55 million yuan/70 million yuan respectively in 2017/18, with a cumulative total of no less than 215 million yuan over the three years from 17-19. Qingtou Intelligence made a net profit of 55.8 million yuan in 2017, fulfilling its performance promise; in 2018, we expect Cingtou Intelligence to fulfill its performance promise and at least double the company's revenue after the merger, and net profit for the whole year is expected to achieve high growth.
The two main businesses are developing together to maintain the “buy” rating
The company is a leader in intelligent transportation and batching systems in the industry, with intelligent manufacturing and environmental management as its two main businesses. 771 million mergers and acquisitions were invested in intelligence, expanding from intelligent transportation to intelligent display control and intelligent equipment. The company achieved net profit of 20.89 million yuan attributable to shareholders of listed companies for the full year of 2017, an increase of 28.98% over the previous year. Excluding net profit of 9.52 million yuan due to the influence of the subsidiary Qingtou Intelligence merger, the company's performance fell short of our expectations. Due to the large decline in revenue from auxiliary equipment systems, the company's intelligent transportation and ingredient business expectations were lowered. At the same time, due to the rapid growth of the environmental protection business, the company's environmental protection business expectations were raised and the 2018-20 EPS was adjusted to 0.68/0.92/1.31 yuan (the previous value of EPS in 2018-2019 was 0.74/0.90 yuan); the company's 2017 performance fell short of expectations, and the reasonable price range was lowered to 27.88-31.28 yuan (previous value was 30.3-35.5 yuan), corresponding to 41-46 times PE in 2018, but Considering the synergies between the company's two businesses and future mergers and acquisitions expectations, the “buy” rating is maintained.
Risk warning: risk of macroeconomic fluctuations; risk of post-mergers and acquisitions integration falling short of expectations.