The original main business of the thermoelectric + securities double main business company belongs to public utilities, mainly engaged in thermal power production and supply. In 2016, the company completed the acquisition of Jianghai Securities. Jianghai Securities has become a wholly-owned subsidiary of the company, and the company's main business is new securities business.
Regional monopoly of heat and power business, income stabilization company is one of the large local cogeneration enterprises in Harbin. In the heating area approved by the government, the company has regional heating franchise, obvious regional monopoly advantages and stable users. The pressure of competition in the same industry is small. Income remains between 11 and 1.2 billion, and gross profit margin fluctuates in a narrow range, around 25 per cent.
Securities business: capital replenishment is in place, and profit conversion is just around the corner. In October 2016, Harbin Investment Co., Ltd. completed a capital increase of 5 billion yuan for its subsidiary Jianghai Securities. After the capital increase was completed, Jianghai Securities' net assets doubled. At present, the utility of capital has not been fully released. In the first half of 2017, the company's ROE was only 1.55%, with an industry average of 3.16%.
The performance improvement of Jianghai in the future will come from four aspects: 1. Capital replenishment is more flexible. The company will actively use bond instruments to increase leverage; 2, based on Longjiang, to the whole country. 3, market-oriented reform; 4, after the company is merged into the listed company, the utilization rate of resources will be improved. The company has rich regional resources and shareholder resources.
The valuation of Jianghai Securities is on the low side, and the margin of safety is high through the market capitalization. Under the current stock price, the market value of Jianghai Securities is 14.8 billion yuan, corresponding to PB 1.39x, which is lower than the current valuation of all listed securities firms (the average valuation is 2.18xPB). In addition, the current stock price is 8.21 yuan per share, which is lower than the restructuring price of 9.43 yuan per share, and the margin of safety is high.
Investment suggestion: we predict that the annual EPS of the company in 2017-18-19 will be 0.25,0.44,0.61 yuan. According to the distribution valuation method, we value the company at 25.3 billion yuan, corresponding to the target price of 12.01 yuan per share, which is 46% more than the current stock price. Cover for the first time, give buy rating
Risk hint: the securities industry is depressed; the company's management is not as expected.
