Event: The company released its 2017 three-quarter results report on October 23. By the end of the third quarter, the company achieved operating income of 1,200.85 million yuan, an increase of 23.57% over the previous year; total profit of 127.7 million yuan, an increase of 45.22% over the previous year; net profit attributable to shareholders of listed companies was 120.65 million yuan, an increase of 42.96% over the previous year, achieving a significant increase in the company's performance. Compared to the previous forecast range, which is in the middle position, in line with growth expectations, the growth target has been achieved.
Commentary:
Power plant projects are gradually increasing, and EPC business is growing rapidly. The company followed the development trend of the industry and successfully completed the strategic transformation from a single product provider to a comprehensive solar solution provider and solar power plant operator. The scale of the company's power plant project steadily increased to the grid in the third quarter, and the EPC business continued to gain strength. The company's annual grid connection volume is expected to be 400-500MW, and the EPC project volume is 60-70MW. Electricity revenue and EPC engineering contract revenue had a positive impact on the company's performance. In the future, the company plans to have its own grid-connected power plant to reach 1 GW, providing strong support for the company's long-term stable development.
New marketing models enhance the company's profitability. The company has increased its component sales efforts, dug deeper into the resources of major customers, and used project EPC and rooftop distributed EPC to drive the company's component sales. The new marketing model that uses projects to drive product sales will continue to reduce the company's costs and increase the company's sales revenue.
Low leverage resists risk, and there is great potential for accumulation and weakness. The company's steady, low-leverage development path has made it extremely resilient to risks, and has accumulated strength for the company's next power plant development. The company is well-funded and full of momentum, and its strength and potential should not be underestimated. The company's balance ratio has remained low at 30%-40%, and the leverage ratio of existing power plants has also remained below 20%. The company uses local industries in Qinghai, Shaanxi, Kashgar, etc. to drive local power plant construction, and has an absolute advantage in land acquisition.
Profit forecast:
We believe that the company's full-industry chain business model lays a solid foundation for the company's steady and long-term development. The low-leverage financial structure also provides financial support for the company's further expansion, which can achieve steady growth. Furthermore, the company's ability to manage costs and withstand risks also protects the company's next development, and the possibility of becoming bigger and stronger is not ruled out in the future. The corresponding 2017-2019 EPS were 0.15, 0.23, and 0.29, maintaining the “buy” rating.
Risk warning:
PV policy risks, the company's power plant business fell short of expectations, module sales fell short of expectations, and overseas expansion fell short of expectations.