Events:
On October 29, 2016, the company released its third-quarter report: the company's operating income in the first three quarters was 466 million yuan, down 16.49 percent from the same period last year; the net profit belonging to shareholders of listed companies was 52.5 million yuan, down 44.96 percent from the same period last year.
Main points of investment:
Competition in the combine market intensified, dragging down the company's overall performance. Combine is the company's main business, accounting for 95.49% of operating income. Since the beginning of this year, under the influence of the upgrading of national three emission standards and the decline of subsidy for single agricultural machinery, the market demand of combine harvesters in China is shifting from incremental trading to stock-based structural adjustment. At present, as the products of the main domestic competitors are gradually mature and seize the market through price competition, the competition in the middle and high-end agricultural machinery market where the company's main product "Xingguang Series combine" is located begins to intensify, resulting in a decline in product sales, thus dragging down the overall performance.
Increase and expand the product echelon to lay the foundation for the growth of the company. In March this year, the company acquired a 51% stake in Hubei Yulong and 56.66% of Jiangsu Zhenggong respectively, and then issued a fixed increase plan to raise 1.001 billion yuan from no more than 10 specific targets at an issue price of 26.41 yuan per share. the funds are mainly used for cotton picker, baler and large and medium-sized tractor projects, among which the cotton picker project and baler project are implemented in the form of capital increase in Hubei Yulong and Jiangsu Zhenggong. We believe that the horizontal expansion of the company through mergers and acquisitions and fixed growth can improve the risk of a single product structure, and is expected to form a new performance growth point in the future.
Equity incentive binds benefits, demonstrating the company's confidence in development. The company's first restricted stock incentive plan was awarded on September 14, and a total of 1.559 million restricted shares were awarded to 251 subjects at a price of 16.88 yuan per share. the unlocking condition is that the growth rate of net profit in 2016-18 is not less than 60,70 and 80 per cent, based on the company's net profit in 2015. We believe that this equity incentive will help to stimulate the enthusiasm of the management team, improve operational efficiency, and be optimistic about the long-term development of the company's performance.
For the first time, the company was given a "neutral" rating: based on the principle of prudence, regardless of the impact of fixed increases on the company's performance for the time being, it is estimated that the company's net profit from 2016 to 2018 will be 80,139,214 million yuan respectively, and the corresponding EPS will be 0.40,0.69,1.07 yuan per share respectively, and the corresponding PE will be 78,45,29 times respectively according to the share price of 31.01 yuan on November 18. We believe that the company will effectively improve its performance through diversified product layout, giving the company a "neutral" rating for the first time.
Risk tips: increased competition in the combine market; the company's new product performance is not up to expectations; increase the risk of failure of administrative examination and approval.