16-year performance meets expectations

Zhejiang Oriental announced 16-year results: operating income was 4.495 billion yuan, down 41.6% from the same period last year; net profit belonging to the parent company was 660 million yuan, up 12.3% from the same period last year, corresponding to 1.31 yuan per share. ROE 11.5% for the reporting period.

Trend of development

Asset restructuring is coming to an end, and the strategy of "financial control plus trade" is on the rise. 1) the company's proposed acquisition of 55% of Zhejiang Gold Trust / 100% of Dadi Futures / 50% of China and South Korea Life Insurance and raising 1.2 billion matching funds has been approved by the CSRC, and the reorganization project has entered the final stage. After completion, the company will obtain three financial licenses of trust, futures and insurance on the basis of the original industrial and financial investment / financial leasing / private equity fund management business, and build a "financial control + trade" holding group.

2) spin off the textile + real estate, focus on the main business: the textile company Shidanu Company has stopped merging since June 16 and is actively promoting its overseas listing process. In addition, the company continues to shrink the real estate business, no longer carry out new land reserves and development, and gradually withdraw.

The operation has made steady progress, and the gross profit margin has increased in an all-round way. Because Shidanu stopped merging and the company took the initiative to reduce its bulk trading business, the company's revenue shrank but its net profit still increased by 12.3%. Among them, the gross profit margin of commodity circulation / industrial manufacturing / commercial housing / financial leasing is + 0.14ppt/0.56ppt/11.30ppt/5.70pptYoY to 13.3%, 14.0%, 24.7% and 81.8%, respectively. In addition, the company has stepped up its efforts to deal with risk events and once again set aside 35.27 million yuan (a cumulative provision of 287 million yuan) for new energy special bad debts, which will help to improve the robustness of asset quality.

Investment and similar financial business have achieved remarkable results, and the characteristic large asset management model has gradually taken shape. 1) the net profit of Guojin Lease in 16 years is 13.68 million yuan, and the total assets are from + 15.3%YoY to 1.23 billion compared with the same period last year. During the reporting period, the company increased its capital to Guojin Lease by 160 million yuan, and its shareholding ratio increased from 75% to 86.5%. 2) the company carries out direct investment through Oriental Industry and Finance; through Oriental Industry and Finance + ITC Oriental Capital + Oriental Jiafu to carry out fund management, the management scale has reached 4.626 billion yuan. During the reporting period, the sale of 28.746 million shares of Haikangwei achieved a profit of 657 million yuan, and the sale of ITC Oriental Capital was set to increase the second phase of the gain of 34.997 million yuan.

Profit forecast

We raised our earnings per share forecasts for 2017 and 2018 by 1 per cent and 11 per cent respectively from Rmb1.45 and Rmb1.44 to Rmb1.47 and Rmb1.60, respectively.

Valuation and suggestion

At present, the company's share price corresponds to 17e 2.0x Pamp B. We maintain our recommended rating and target price of 40.70 yuan, which is 45.36% upside from the current share price.

Risk.

The progress of asset restructuring is not as expected and the policy is uncertain.