Investment highlights:
The company's performance increased sharply in the first quarter of 2017. The company's revenue in the first quarter of 2017 reached 857 million yuan, an increase of 46.95% over the same period last year. Net profit attributable to shareholders of listed companies was about 22 million yuan, an increase of 310.91% over the same period last year. Basic earnings per share were $0.0302, an increase of 277.50% over the same period last year.
Traditional assets have maintained steady growth, and Baotou and Heyuan will soon be released. In 2016, the company completed 143,000 tons of aluminum processing output, an increase of 15.3% over the previous year. Among them, the Changshu plant sold 123,000 tons of aluminum foil, an increase of 10.4% over the previous year; the Baotou factory achieved sales of 101,000 tons of aluminum sheet and strip, an increase of 60.6% over the previous year; and the Heyuan plant completed 7094 tons of aluminum pipe production, an increase of 33.3% over the previous year. The Baotou plant will fill the design capacity of 250,000 tons in 2017, and the Heyuan plant will produce 1,000 tons/month after the latest generation welded pipe production line is put into operation in August, making it the company with the highest monthly production of high-frequency welded pipes for automobiles in the world.
Integrate the upstream and downstream of the industrial chain and optimize the product structure. The upstream Baotou subsidiary is mainly responsible for the production and sale of aluminum ingots and aluminum sheets with foil, supplies billets to Changshu, and also undertakes low-end products such as air conditioning foils; the downstream subsidiary Shandong Xinheyuan mainly provides high-frequency welded aluminum pipes for automobile cooling systems to domestic and joint venture middle and high-end automobile manufacturers; the Changlu Division is mainly responsible for producing high-value-added automotive foil. In 2016, the company's aluminum foil products revenue was 2,455 million yuan, an increase of 20.37% over the same period last year, and gross margin reached 18.37%. By integrating the upstream and downstream industrial chains, the company strives to refine the pricing units for aluminum processing products so that they change according to the “tons-kilo-pieces” path.
The medical cleaning business is broadened horizontally and vertically, making good profits. The company's revenue of medical cleaning products in 2016 was 580 million yuan, an increase of 41.71% over the same period last year, and the gross margin was as high as 31.88%. The clean medicine industry signed 970 million yuan of new project contracts throughout the year, an increase of 12.4% over the previous year; completed 775 million yuan of project contracts, an increase of 11.0% over the previous year. In 2016, the company acquired 80% of the shares of Sichuan Chenxi Construction Engineering Co., Ltd., and the cleaning business expanded horizontally from existing pharmaceutical companies to the hospital sector. Integrate upstream and downstream companies vertically, improve their overall contracting ability and bid competitiveness, and lay the foundation for subsequent EPC order taking ability and the company's overall profitability.
Increase capital and optimize medical treatment to steadily promote the “big health” industry. In 2016, the company increased the capital of Youshi Medical Technology Co., Ltd. by 40 million yuan, with a shareholding ratio of 25%. Currently, Kirschner Wire, a subsidiary of Youshi Medical, has passed FDA certification. The product is used for fixing human fractures, reconstructing bone structures, and assisted fixation of orthopedic implants, and is expected to be sold domestically after being certified by the China Drug Administration.
Profit forecast data: The company will focus on implementing the “aluminum processing+big health industry” strategy for the collaborative development of the two main industries. EPS for 17-19 is expected to be 0.30 yuan/share, 0.39 yuan/share, and 0.48 yuan/share. The company was given 28 times the PE of 2017, with a target price of 8.4 yuan, increasing its holdings rating.
Uncertainty analysis. Risk of cyclical fluctuations in the aluminum rolling processing business; the development of the health industry fell short of expectations.