The mixed reform has been completed, the system has been continuously optimized, the double main industries have grown steadily, and the assets and funds are abundant. In 2016, the company's food and book distribution industry both developed steadily. The total income of the food industry in 2016 was 1.165 billion yuan, an increase of 7.64% over the same period last year, and the gross profit margin was 10.14%, an increase of 3.3% over the same period last year. The total revenue of the book distribution industry in 2016 was 903 million yuan, an increase of 6.70 percent over the same period last year, and the gross profit margin was 18.78 percent, a slight decrease of 0.09 percent over the same period last year. The company continues to optimize the company's business model, to modernization, "Internet +" direction.
At the same time, the company's cash and bank financial management were more than 800 million at the end of 2016, and the company's extension has a comparative advantage under the background of tight income increase. According to the regional planning and capacity restrictions of cold storage, the land value of the company's cold storage in Guangzhou, Zhongshan Tanzhou and Foshan may be improved. Since the controlling shareholder completed the mixed reform, the optimization of the company system is constantly advancing, with the promotion of the executive shareholding plan, the management team is trying to become bigger and stronger.
Seize the opportunity of regional upgrading and increase the pace of capital operation and innovation and development. The reform of state-owned enterprises in Guangdong Province is relatively strong, 2017 is also the year to tackle key problems, and institutional optimization measures throughout the province are expected to continue to emerge. At the same time, in the first quarter, Guangdong-Hong Kong-Macau Greater Bay Area officially put forward the concept that Zhuhai, Guangzhou, Shenzhen and the surrounding areas are expected to face regional upgrading opportunities, bringing comprehensive value enhancement. The company is the main K12 stage teaching materials distributor of the provincial education bureau, and the education publishing business has stable customer resources upstream and downstream; at the same time, the company has the largest cold storage + frozen goods market in the province, and occupies the leading position in the cold chain of meat and food in the province. In the new year, the company is expected to continue to benefit from regional upgrading opportunities, strive for progress in stability, improve the utilization rate of the company's land, funds and business, and gradually achieve value enhancement through capital operation and innovative development.
Investment advice and profit forecast. We believe that Guanghong (1) combined with the advantages of background resources, recent system optimization actions, regional national reform goals, the company's strategic upgrading demand is obvious. On the one hand, in the education industry, Guanghong has a leading channel advantage in Guangdong Province, strong cooperation in grafting educational resources and expanding product lines, relatively solid financial foundation, steady growth in income and profitability, abundant cash reserves, low debt ratio and other characteristics, financial strength to build a strong backing for transformation and upgrading. On the other hand, the company is not deeply involved in other areas of education industry other than teaching materials and teaching, and still needs to cooperate to shorten the learning curve. (2) valuation has a certain margin of safety: the company's original industrial land is in the process of urbanization in Guangzhou, Zhongshan, Panyu, etc. the possibility and necessity of changing land use and significantly increasing value is also in line with the inherent needs of the company's strategic upgrading and optimizing asset structure. The company's original double main business has a unique regional monopoly advantage, facing the background opportunity of consumption upgrading and steady growth of income and profit.
Based on the development trend of the existing business, regardless of the possible future capital operation, we predict that the net profit of the company in 2017 and 2018 is 127 million and 141 million respectively, and the corresponding EPS is 0.22 yuan and 0.24 yuan respectively.
Combined with the valuation level of the listed companies in the same industry, the profit contribution of the two main industries of the company, and the background trend of the company's strategic upgrading, we will initially give 65 times PE in 2017, corresponding to the target price of 14.3 yuan per share, and maintain the buy rating.
Risk tips: the reform process and extension development of state-owned enterprises in Guangdong Province are not as expected; the risks of cold chain industry, publishing industry and so on.
