Main points of investment
Sales have increased in an all-round way, and the performance has increased significantly. Operating results in 2016: revenue increased by 44.6% year-on-year to 6.263 billion yuan; gross profit decreased 1.4 percentage points to 16.4% from 17.8% last year; net profit increased by 108.5% to 232 million yuan, or HK5.50 cents per share. The sharp increase in performance in 2016 was mainly due to the increase in sales of all kinds of battery products, while the slight decline in gross profit margin was mainly due to the rise in lead prices and the inability to pass on all consumption taxes to customers.
Lishi has become the largest telecom battery supplier in China. The backup battery contributed 4.32 billion yuan in revenue to the company in 2016, an increase of 36.7% over the same period last year, and the company has become the largest telecom battery supplier in China. We believe that the future 5G construction will drive the continuous demand for telecommunications batteries, and the rapid development of cloud computing and data centers will also bring the market demand for backup batteries.
The promotion of new products is worth looking forward to. Li Shi International has mastered and applied most of the lead-acid battery technology in the world, and has developed more than 2000 different types of batteries. The company hopes to work with Gridtential to commercialize a new technology for electroplated silicon wafers to replace lead gates, which outperforms lithium-ion batteries in terms of performance and has advantages in cost, safety and recycling.
Enter into the field of recycling of waste lead-acid batteries. In December 2016, Lishi acquired a 60% stake in a waste battery company in Taihe County, Anhui Province, and entered the field of lead-acid battery recycling through vertical integration, which can not only stabilize the company's lead raw material prices, but also respond to the government's call to promote environmental protection and achieve synergy.
Our point of view: Lishi International, as an important domestic lead-acid battery manufacturer, has become the largest telecom and communication battery supplier in China. The company's global layout, actively strive to expand market share. The company's cooperation with Gridtential in the promotion of new technology products is worth looking forward to, while entering the field of waste battery recycling to achieve synergy. The company's current stock price is about 9 times PE,0.8 and PB corresponding to its 2016 results, and investors are advised to follow it actively.
Risk tips: increased competition in the industry, a decline in gross profit margin; lead prices fluctuated sharply.