Main points of investment
Net profit increased 1.5 times in 16 years. The company achieved revenue of 5.469 billion yuan in 2016, an increase of 15.5% over the same period last year. The net profit belonging to the parent company was 278 million yuan, an increase of 59.9% over the same period last year. After deducting the one-time effect, the company's 16-year net profit was 286 million yuan, an increase of 153.1% over the same period last year. The profit growth rate of the company is significantly higher than that of revenue growth. This is mainly due to the increase in profit per ton brought about by price increases.
The effect of the price increase is expected to last until 2017. The company raised prices four times in 2016, the shallow reason for the price increase is due to the rise in steel prices, and the deep reason is that the supply and demand in the industry is tense, and the company is one of the two oligarchs of steel cord. As the company has a certain inventory of raw materials, enjoy inventory income in the rising process, coupled with the price increase may be slightly larger than the increase in steel, the price increase will bring a rise in net profit per ton. Due to the gradual increase in prices from the second half of the year, only half a year will benefit in 2016, and it is expected to benefit from the impact of price increases for the whole of 2017.
Our view: on the whole, the outstanding performance of the company's annual report is mainly due to the increase in profits brought about by the price increase in the second half of the year. It is expected that 2017 will still benefit from the impact of the price increase, and the performance is still expected to be high. High dividend is another major feature of the company. The company's stock price currently corresponds to a 16-year price-to-earnings ratio of 16 times, dividend yield of 4.4% and price-to-book ratio of 0.85 times. Considering that the company's performance flexibility is still large, it is recommended to pay attention to it.
Risk hint: steel prices fluctuate sharply; rising costs cannot be transferred; the level of gross margin per ton is not as expected.