The main business growth is steady, and the cash flow remains stable.
The company's 2016H1 realized operating income of 580 million yuan, an increase of 16.45% over the same period last year, and its net profit was 400 million yuan, down 2.42% from the same period last year. In order to cope with the growth of traffic flow, the company, combined with the traffic pressure of various toll stations, orderly promoted the expansion of toll stations and the construction of new weight lanes, and further improved the capacity of toll stations. In the first half of the year, the toll flow on highway sections was 36.33 million, an increase of 17.55% over the same period last year. Toll revenue reached 478 million, an increase of 8.48% over the same period last year. The performance of Dongguan Securities, which participated in shares in the reporting period, fell sharply under the influence of the prosperity of the industry, and the investment income contributed by associated companies decreased by 45.79%, which was in line with our previous expectations. The steady development of the main business better makes up for the impact of the decline in investment income and provides sufficient and stable cash flow for the transformation of financial control.
High growth of leasing business, business coordination to promote development
The company's leasing business maintained rapid growth, with revenue of 91 million yuan and net profit of 43 million yuan in the first half of the year, up 101.34% and 73.5% respectively over the same period last year. During the reporting period, the company strengthened the fine management of the business team, implemented targeted marketing promotion activities, and further built rich marketing channels; at the same time, it constantly improved the construction of risk control system to reduce the risk of the whole process of leasing project operation. The company also plans to co-initiate with Guangdong Hongchuan Group to set up Hongtong Commercial factoring Company in Tianjin Binhai New area, with a registered capital of 500 million yuan, of which Dongguan Holdings contributes 475 million and holds 95%. With the help of shareholder resources, Hongtong Commercial factoring and Dongguan Holdings will carry out factoring business around road and bridge project receivables and the supply chain of warehousing enterprises, and realize resource sharing, cross-marketing and coordinated development with Rentong Leasing in the aspects of customer resources, marketing and risk control, so as to improve the rate of return and market competitiveness of financial leasing business and reduce the liquidity risk of financial leasing business.
It will increase the capacity and improve the strength, and the prospect of regional financial control is broad.
Rentong Leasing, which is controlled by the company, has a strong momentum of development and strong capital demand. The company intends to raise no more than 1.4 billion yuan through a non-public offering to increase the financing lease. at present, the plan has passed and has yet to be formally approved. After the completion of the fixed increase, the registered capital of Rongtong Lease will double, and the performance is expected to be achieved in 2017. The employee stock ownership plan, which is one of the objects of fixed increase, has a lock period of 3 years to achieve the consistency of the interests of employees and the company and effectively stimulate enthusiasm. Dongguan Securities, which is a shareholder of the company, is queuing up at IPO and is expected to bring considerable investment income after listing. The company also participates in Dongguan Trust, Changan Village Bank and Songshan Lake small loan Company, all of which are actually controlled by Dongguan SASAC. As the only listing platform of Dongguan SASAC, benefiting from the accelerated reform of state-owned enterprises, the company is expected to achieve the transformation to a local financial control platform, and is likely to undertake the coordinated development of industry and finance under Dongguan SASAC.
Be optimistic about the development prospect and maintain the rating of "increasing holdings"
We are optimistic about the company's development strategy of "dual drive of industry and finance" and the development prospect of transformational finance. The main business grows steadily and continues to bring stable cash flow. The imminent landing of the non-public offering will bring capital supplement to the high-growth leasing business, and the soon-to-be established commercial factoring company will also promote the integration of internal resources, improve operational efficiency and further accelerate the financial layout. The acceleration of the reform of state-owned enterprises is expected to promote the transformation of the company to a local financial control platform and serve the development of regional industries. We estimate that the EPS in 2016-18 will be 0.6,0.73 and 0.94 yuan respectively, corresponding to PE 17x, 14x and 11x, with a target price range of 11.58 to 13.49 yuan, maintaining the "overweight" rating.
Risk hint: the fixed increase process is not as expected, the national reform process is not as expected, the IPO process of Dongguan Securities is not as expected, and the market volatility risk.