Pre-loss in the first half of 2016
Dongfang Tantalum Industry issued a pre-loss announcement, predicting a net loss of 1.1 to 180 million yuan (corresponding to 1H16 EPS-0.25 yuan to-0.41 yuan) attributed to the parent company in the first half of 2016, compared with a net loss of 160 million yuan in the same period last year. Among them, the net loss attributed to the parent company in the second quarter is expected to be 0.4 to 110 million yuan.
Pay attention to the main points
Both the volume and the price of traditional business have dropped. The company's traditional products are tantalum and niobium products, which contributed 60% of the total revenue in 2015. The main downstream application of tantalum is capacitors, and the demand has been shrinking in recent years, and the company's sales have continued to decline. The average price of tantalum metal fell 14% in the first half of 2016 compared with the same period last year, and the gross profit margin of traditional business was under pressure.
The profit of the new industry is lower than expected, and the titanium plate continues to lose money. The company lost 83.38 million yuan in titanium and titanium alloys in 2015, mainly due to fierce competition in the civilian titanium market, high barriers to entry in the military market and limited sales. At present, the proportion of ingots and plates in titanium processing materials is large, and the product structure is unreasonable, which has not formed effective support for the management.
The transfer of the shares held by the state-owned shareholders by agreement shall be approved. In June this year, SASAC approved that the controlling shareholder of the company, China Color Oriental Group, would transfer its 12343 million shares to Dalian Longtai Venture Capital Co., Ltd. After the transfer, the stake in China Color Oriental will be reduced from 45.8 per cent to 17.8 per cent, while Dalian Longtai Venture Capital holds 28 per cent.
There is uncertainty in the restructuring plan and the risk of delisting remains. At present, the company is actively planning a major asset restructuring: it intends to sell the main business assets to China Color Oriental, and swap the non-main business assets with 100% equity of the company (tuna fishing) owned by Longtai Venture Capital's actual controller (tuna fishing). The replacement difference will be purchased from the shareholders of the tuna fishing company by the company's issued shares. However, the specific implementation rules and progress are still uncertain, while the downstream of the main products is still weak, and it is difficult to improve profitability. The company has lost money for two consecutive years in 2014 and 2015, and will be suspended if it fails to make a turnaround in 2016.
Valuation and suggestion
Keep the company's profit forecast for 2016 / 2017-0.80 yuan /-0.72 yuan unchanged, reflecting the greater pressure on the company to improve its profits. Maintain the target price of 10 yuan (5.6x 2017e Pamp B) with a neutral rating.
Risk.
Business restructuring was less than expected; tantalum and niobium prices continued to decline.