Event: the Central Economic work Conference was held in Beijing from December 18 to 20. The meeting proposed that the implementation of the rural revitalization strategy is one of the eight key tasks next year.
To benefit from the rural revitalization strategy, the support of the agricultural machinery industry is expected to be increased: this central economic work conference proposed to implement the rural revitalization strategy and improve the system and mechanism for the integrated development of urban and rural areas. we will promote the structural reform on the agricultural supply side and deepen the reform of the grain collection and storage system. We believe that the first thing to bear the brunt of promoting rural revitalization is to vigorously develop rural productive forces and improve the productivity level of farmers. To improve the level of agricultural mechanization and build agricultural modernization is the most effective way. From this point of view, the agricultural machinery industry will directly benefit from the rural revitalization strategy, policy support is expected to be increased.
The industry has made steady progress during the trough, and the product line has been continuously enriched: in the past two years, the overall growth rate of the agricultural machinery industry has slowed down due to the slowdown in grain collection and storage and the decline in subsidies for the purchase of agricultural machinery. The company will increase the layout of its product line during the trough of the industry and maintain steady progress. In 2016, the company entered the field of baler and cotton picker through the acquisition of Xingguang Yulong and Xingguang Zhenggong. The company's rotary tillers and tractors have achieved small-scale sales, while storing dryers, seeders and other new products, the company's product line is constantly rich. In addition, the company plans to raise an additional 559 million to invest in the "annual production of 5000 balers" and the "annual output of 10000 tractors of the size of Taichung", which has been examined and approved by the CSRC, waiting for approval.
With the increase of the concentration of shuffling in the industry, the company is expected to stand out: since 2004, the agricultural machinery industry has experienced a "golden decade" of development, and the overall market size has increased 10 times. In recent years, the growth rate of the industry is expected to slow down, competition intensifies, and the industry enters a reshuffle period, especially in the context of the current stricter environmental protection, the survival threshold of enterprises is raised, and the industry concentration is expected to continue to increase. As a private enterprise, the company has great flexibility in operation, management and incentive mechanism, and is a small number of agricultural machinery enterprises with listed company platform, which is expected to stand out from the industry.
Profit forecast and investment advice: we expect the company's net profit for 2017-2019 to be 45.15 million, 72.91 million and 116 million, respectively, corresponding to 89 times, 55 times and 35 times PE, respectively, maintaining a "buy" rating.
Risk hint: competition in the combine market intensifies, and the market expansion of new products falls short of expectations.