Main points of investment:
Event: the company released its three-quarter report on the evening of October 28. From January to September 2016, the company achieved operating income of 11.047 billion yuan (YOY28.48%) and net profit of 178 million yuan (YOY77.93%). In the third quarter of 2016, it achieved operating income of 3.821 billion yuan (YOY13.28%) and net profit of 88.1891 million yuan (YOY71.86%). It is estimated that the change in net profit for 2016 will be between 10% and 40%.
Comments:
Cost control is good, non-operating income has increased significantly, and the company's profitability has been further improved. From January to September 2016, the company's expense rate during the period was 6.5% (compared with 7.7% in the same period last year). Among them, the control of administrative and financial expenses improved the company's profitability. In addition, as the investment cost of obtaining subsidiaries in the current period is less than the income generated by the fair value of the identifiable net assets of the invested unit, the company's non-operating income increased by 551.95% compared with the same period last year, further releasing the company's performance.
Acquire Baosheng Shanghai and carry out industrial integration effectively. The company invested 65.3513 million yuan to acquire an 80% stake in Baosheng Shanghai, which is mainly engaged in industrial investment, self-owned housing rental, property management and other business. The purpose of this acquisition is to establish the company's management, production and R & D base in Shanghai, effectively carry out industrial integration, and quickly realize the company's strategic planning and layout by making use of the advantages of talents, information and services in Shanghai. The smooth implementation of the acquisition project will also have a positive impact on the company's performance growth and future long-term development.
Invest in high-speed rail transit digital signal and intelligent network cable production projects to optimize the company's product structure. According to its own development needs, the company plans to use its own capital of RMB 380 million to invest in high-speed rail transit digital signals and intelligent network cable production projects. The construction period of the first phase of the project is about 1.5 years, and it is planned to produce railway digital signal cables and network cables after completion. The first phase of railway digital signal cables will reach a production capacity of 16000km/ per year, with an output value of about 400 million yuan; the first phase of network cables will reach a production capacity of 600,000 boxes per year, with an output value of about 300 million yuan; and the second phase of network cable production capacity will be increased to 1 million to 1.2 million boxes, with an output value of 600 million yuan. The total production capacity is 1 billion yuan. The technical renovation project for the expansion of railway digital signal cable has the characteristics of low investment, short period, remarkable benefit and so on. Further optimize the company's product structure.
Profit forecast and investment advice. It is estimated that the EPS in 2016-18 will be 0.32,0.42,0.63 yuan respectively. Considering that the company has been listed in AVIC, and considering the performance commitment of the company's acquisition of Nissin Transmission and Shanghai Anjie, it is estimated that the EPS in 2016-18 will be 0.32,0.42,0.63 yuan respectively. With reference to the current comparable company's average PE of 37 times in 2016, the company is given 30 times PE in 2016, maintaining the target price of 9.60 yuan. Maintain a "buy" rating.
Risk hint. (1) the competition in the power cable industry is intensified; (2) the uncertainty of military orders.