Chutian Expressway released the 2016 Annual report. In 2016, the company achieved operating income of 1.273 billion yuan (+ 3.4%), gross profit margin rose to 65.0% (+ 1.3pct), net profit attributed to the parent company was 390 million yuan (- 9.1%), EPS was 0.27 yuan. The company plans to pay a cash dividend of 1 yuan (including tax) for every 10 shares.
Affected by deferred local tax assets, the company's net profit declined slightly. In 2016, the company achieved 1.273 billion yuan in revenue, up 3.4% from the same period last year, mainly because the company's toll revenue increased by 3.3% to 1.21 billion yuan compared with the same period last year. The company's net profit was 390 million yuan, down 9.1% from the same period last year, mainly due to an increase of 111 million yuan in net profit due to the company's recognition of deferred income tax assets in 2015. excluding this effect, the company's attributable net profit increased by 22.42% compared with the same period in 2015.
The main business of expressways still has growth potential. At present, the company mainly has the Hanyi section of Shanghai-Chongqing expressway, the Dasui section of Ma-Zhu expressway and the third section of Huangxian section of Wuhan ring highway. Although the operation of the expressway in Hanyi section has matured and the revenue growth of the company is limited, Dasui section and Huangxian section are in a state of loss because of the "broken road" and other reasons, with the gradual construction of the upstream and downstream lines of these two sections of highway. traffic has begun to pick up. In 2016, Dasui section and Huangxian section increased by 19.0% and 11.5% respectively compared with the same period last year. We believe that the turnaround trend of these two sections is obvious. The company's main highway business still has growth potential.
Acquisition of Miki Intelligence, two-wheel drive for the future. On January 20, 2017, Miki Intelligence completed the transfer of ownership and officially became a wholly-owned subsidiary of the company. since then, the company has become a highway enterprise with both extension transformation and employee shareholding at the same time. The business model has shifted from the original road and bridge operation drive to "road and bridge operation + intelligent manufacturing" two-wheel drive. Miki Intelligent, as an advanced hardware equipment manufacturing enterprise in China, has high competitiveness in the field of intelligent manufacturing, but in the early stage, the company mainly did ODM in overseas markets due to financial problems, and its development speed was slow. After it is merged into Chutian Expressway, relying on the strong cash flow of Chutian Expressway, it will make up for the defect of Miki Intelligent funds to a large extent and strengthen the market development of Miki Intelligence. Moreover, Miki Intelligence has begun to enter the domestic market through cooperation with Philips in early 2017. coupled with its accumulated experience in overseas markets and its layout in the logistics network, Miki Intelligent Business is expected to blossom at multiple points, driving Chutian Expressway income to rise rapidly.
Investment advice: the company has completed the transfer of ownership of Miki Intelligence, which is expected to be merged in 2017. Considering the consolidation situation, we estimate that the company's EPS from 2017 to 2018 will be 0.30 yuan and 0.34 yuan respectively, giving the company a "buy-A" rating and a six-month target price of 7.6 yuan.
Risk hint: the growth of traffic flow in the main business of the highway has slowed down, and the progress of Miki intelligent market expansion is not as expected.