Items:
The company released its 2017 annual report on April 24. During the reporting period, the company realized operating income of 2.563 billion yuan, + 77.86% compared with the same period last year, and realized net profit of 221 million yuan, compared with + 43.51%, + 43.51% and + 41.33% of Q1 in 2018, respectively. The net profit of Q1 was 49 million yuan, + 11.36%.
Comments:
The business performance of modified plastics is stable and Xingke Electronics is back on track. For 2017Q1~Q4 and 2018Q1, the company realized net profit of 4385.8%, 5958.7, 5187.6, 6583.1, 49.12 million yuan, respectively, compared with the same period last year, which was + 2.72%, 2.22%, 7.70%, 1150.09, 12.18% respectively. The performance growth is mainly brought about by the rapid growth of modified plastics business (+ 27.65% compared with the same period last year) and the consolidation of Xingke Electronics in March. Among them, 16Q4 was affected by the Letv incident, Xingke Electronics lost money, resulting in the parent company's investment income from 29.55 million yuan to a loss of 84.53 billion yuan, dragging down the return net profit; 17Q4 Xingke back to the right track, home net profit increased significantly.
Research and development investment and fine cost control in parallel, profitability is expected to be further improved. As the leader of the modified plastics industry, the company has continued to increase its R & D investment in recent years to ensure the continuous improvement of the company's technological innovation capability. As of December 31, 2017, the company had 193 authorized patents and 115 new authorized patents during the reporting period. At the same time, the company controls the cost through fine management, and controls the cost at a low level on the premise of ensuring the product quality, which ensures the competitiveness of the company's products. We are optimistic that the company's profitability will continue to improve in the future.
Xingke Electronics carries out strategic adjustment and two-way development of product customers. In 2016, the company bought 66.20% of Xingke Electronics, and in February 17, the remaining equity was acquired as a wholly-owned subsidiary, which was consolidated in March. After the "Letv" incident, Xingke Electronics promptly adjusted its strategy in 2017 and upgraded to diversified customers and diversified product companies by means of increasing product research and development and the use of intelligent equipment. The business has returned to the right track and reversed losses in the second half of 17 years, withholding 132 million yuan in non-net profit for the whole year. But in the future, Xingke Electronics may be affected by the downturn in the mobile phone industry, which will be a drag on earnings growth.
Enter the lithium cobalt industry, the performance of new growth points can be expected. At present, with the rapid expansion of new energy vehicles as a national strategy, the rapid development of the ternary battery industry has directly led to a large demand for upstream cobalt. The company established Dongguan Silver Jubilee Cobalt Co., Ltd. in October 2017, and established Sun Company Congo Jubilee Mining Co., Ltd. and wholly-owned grandson Company Jubilee Technology (Congo) Cobalt Co., Ltd. in December 2017 and January 2018, respectively, opened the channels for international cobalt business and is expected to begin to contribute revenue this year.
Risk factors: 1. The competition of modified plastics and metal CNC industry intensifies; 2. The investment and development of cobalt and other metal raw materials is uncertain; 3. The price of raw materials fluctuates.
Maintain a "buy" rating. We expect the modified plastics industry to continue to rise in 2018, but may face a slowdown due to fierce competition for downstream products in the industry. The company's EPS forecast for 2018-2020 will be 0.43 yuan 0.52 yuan (the original forecast is 0.76 yuan 1.10 yuan for 18 years). However, considering the company's layout and potential performance flashpoint in the field of cobalt in the upper reaches of lithium electricity scarcity, the company maintains a target price of 22.7 yuan (corresponding to 53 times in 18 years) and a "buy" rating.