Century riel's performance is lower than expected.
Century Ruier announced its 2016 results: operating income was 470 million yuan, up 20% from the same period last year; net profit belonging to the parent company was 90.78 million yuan, down 20% from the same period last year, corresponding to 0.17 yuan per share. 4Q16's operating income was 280 million yuan, an increase of 70.6% over the same period last year, and the attributable net profit was 110 million yuan, an increase of 50.5% over the same period last year, which was lower than expected.
Revenue was recognized in the fourth quarter and increased for the whole year. 2016 the revenue of the railway industry increased slightly by 0.18% compared with the same period last year, of which revenue from traffic safety monitoring systems / other information systems fell by 39.7% and 64.0% respectively compared with the same period last year. Revenue from railway communications systems increased by 20 percent over the same period last year, and revenue from integrated operation and maintenance services totaled 120 million yuan, accounting for 24 percent. While water conservancy and operator communications revenue increased by 33% and 1776% respectively. Gross profit margins of traffic safety monitoring / communication systems / other information systems respectively fell 15ppt/32ppt/67ppt compared with the same period last year. However, benefiting from the increase in integrated operation and maintenance services with high gross margins, the railway gross profit margin fell slightly 0.98ppt. The gross profit margin of water conservancy products fell 58ppt, while revenue from operating communications products rose 5ppt. Comprehensive gross profit margin fell 2.9ppt.
The expense rate declined, but the decline in investment income and non-operating income led to a decline in net profit margin.
In 2016, the sales / administrative expense rate decreased 0.9ppt/1.7ppt compared with the same period last year, while the financial expense rate increased 1.6ppt. However, due to investment income from the disposal of long-term equity investments last year, investment income fell 42% compared with the same period last year; non-operating income fell 65% due to reduced government subsidies.
Operating cash flow more than 56.32 million yuan compared with the same period last year, mainly 4Q net inflow of 97.9 million yuan.
Trend of development
Follow the progress of the acquisition of Beihai Communications. The company announced on March 20 that it intends to acquire a 100% stake in Beihai Telecom to further lay out the field of passenger information systems. Beihai Communications is mainly engaged in passenger information system and public broadcasting system, which has a synergistic effect with the company's original business in terms of customers and technology. Beihai Telecom has pledged a net profit of 40 million yuan / 50 million yuan / 61 million yuan from 2017 to 2019, with an average annual compound growth rate of 23%, and is expected to thicken EPS23% in 2017. At present, the acquisition has been reviewed by the board of directors, and it is expected that the acquisition can proceed smoothly.
Profit forecast
Considering that the performance is lower than expected, we have lowered our earnings per share forecasts for 2017 and 2018 by 18% and 6% from 0.27 yuan and 0.31 yuan respectively to 0.22 yuan and 0.29 yuan respectively.
Valuation and suggestion
At present, the company's share price corresponds to 2017e 44.4x. We maintained a neutral rating, but lowered our target price by 17.42% to RMB 9.91, which is 1.43% upside from the current share price.
Risk.
Face losses in the first quarter; follow-up acquisition risk.
