The main business has made great efforts to invest, and the performance has increased substantially in advance.
Junzheng Group forecasts a net profit of 1.43 billion yuan to 1.68 billion yuan belonging to shareholders of listed companies in 2016, an increase of 70% 100% over the same period last year. The main reason for the growth is the continuous improvement of the company's integrated circular economy industrial chain, stable and orderly production, the company's leading products PVC, caustic soda prices rose in the second half of the year compared with the same period last year; equity method accounting investment income of participating companies increased compared with the same period last year. As a representative enterprise of chlor-alkali chemical industry in Inner Mongolia, the company actively arranges in the financial sector, ironing the cycle on the basis of resource coordination to improve profitability.
Supply-side reforms superimposed price increases to boost performance
PVC, caustic soda and ferrosilicon entered a cyclical development period in the second half of 2016. Throughout the year, the market price of PVC (calcium carbide) in North China rose from 4667 yuan to 7914 yuan, an increase of 70 percent. This is mainly due to the strong rebound in crude oil prices and the improvement in the bulk raw material market; secondly, the PVC market has been operating under pressure in the early days, bottoming out in the futures market; in addition, environmental protection inspection has also indirectly affected the plant construction of PVC enterprises, aggravating the tight supply situation and pushing up market prices.
The prices of ferrosilicon and caustic soda also increased significantly in the process of actively eliminating production capacity and eliminating backward production capacity, in which the market price of caustic soda (32% ionic membrane) rose from 520 yuan to 935 yuan, an increase of 80%. The market price of Wuhai ferrosilicon FeSi75-B in Inner Mongolia rose from 3800 yuan to 6250 yuan, an increase of 64%.
The integration of circular economy to reduce costs and maintain the competitiveness of the industry
In addition to the rise in prices, Junzheng Group has improved the industrial chain of circular economy, increased the self-sufficiency rate of raw materials and power supply, reduced costs, and increased the gross profit margin of its main business. The area around Wuhai City has a large number of high-quality limestone resources, which can be used to produce low-cost high-quality calcium carbide with obvious cost advantages. In 2015, the company raised a net fund of 4.873 billion yuan for the construction of the "Erdos Junzheng Circular economy Industrial chain Project". For the company to further improve the circular economy industrial chain, improve production efficiency, reduce production costs, and further enhance the competitiveness of the industry to provide a strong guarantee.
Layout of insurance funds, financial investment to promote coordinated development
The company has increased its investment in Huatai Insurance in the past two years, and its shareholding will increase from 15.3% to 22.3% after the regulatory approval, making it the largest shareholder of Huatai Insurance. Huatai Insurance is a comprehensive insurance group, covering the R & D and sales of property insurance, life insurance and asset management products. Over the past 20 years since its establishment, the average compound growth rate of its main business has reached 34.59%, generating a net profit of 7.5 billion yuan. The company also holds a 15.6% stake in Tianhong Fund, which is the third largest shareholder of the company and enjoys the development dividend of the fund industry. At the same time, the company also holds some shares in Wuhai Bank and Guodu Securities, enjoys synergy in the exchange of resources in various financial sub-fields, and supports the real industry to achieve the development of industry-finance integration.
Continuous improvement in performance and maintenance of overweight rating
The company has the right to increase the price at 4.6 yuan per share, with a high margin of safety. Under the support of improved supply and demand, cost and freight, the PVC market is expected to remain high this year, while under the effective operation of the company's circular economy industrial chain, the cost is further reduced and profitability is enhanced. The insurance industry is in a rising cycle, the premium side accumulates rapidly, the investment side benefits from rising interest rates and warmer equity returns, and industry profits are further released. It is estimated that the company's EPS in 2016 and 2017 will be 24 times and 21 times of 0.19 and 0.21 times respectively, and will continue to maintain its overweight rating.
Risk hint: the improvement of supply and demand in the chemical industry is less than expected, and the return on investment has declined sharply. Financial investment is blocked.