Brief comment on performance
In 2015, the company achieved operating income of 2.314 billion yuan, an increase of 17.39% over the same period last year, and the net profit belonging to shareholders of listed companies was 157 million yuan, down 20.34% from the same period last year.
Business analysis
Sewing machinery industry continues to operate at a low level, and the company's performance growth is under certain pressure. In 2015, 100 whole machine enterprises in the industry sold a total of 5.499 million sewing machines, down 17.93% from the same period last year. In this context, the company completed an operating income of 2.3 billion yuan, an increase of 17% over the same period last year, mainly from two aspects: first, it invested in holding Shanghai Shensi Enterprise Development Co., Ltd., with a new logistics service income of 381 million yuan; second, the sales revenue of European sewing equipment of the holding subsidiary increased by 15.9% compared with the same period last year. The company achieved a net profit of 157 million yuan, down 20% from the same period last year. The reasons for the increase in revenue and the decline in profit are as follows: first, the company received income from the disposal of land last year, and its non-operating income was 91.62 million yuan more than this year; second, the inclusion of Shanghai Shensi in the scope of the merger in this period increased the management expenses by 54.33 million yuan, reducing the current net profit.
Adhere to global management, promote the integration of resources and strengthen the main sewing industry. In Europe, the company has acquired three important sewing equipment companies, Dukerpur Aihua, Baifu and KSL, and integrated them on the European platform. Duke Pu Aihua and Baifu have changed from competitors to partners, enhancing their global competitive advantage in the middle and high end market; KSL has the world's leading special sewing technology, which is a sharp tool for the company to develop sewing equipment in the automotive interior and aerospace fields. In August 2015, the company invested 200 million yuan in Stoll in Europe to hold 26% of its equity, expanding the company's industrial chain from sewing equipment to textile knitting machinery.
Expand and extend the company's industry and promote the construction of domestic production bases. In April 2015, it invested 7500 million to control 40% of Shanghai Shensi, expanding the company's business into the field of logistics services, and established a production base in Taizhou in cooperation with private capital, mainly engaged in the production and sales of standardized intelligent garment sewing equipment. At present, the company has initially established three major production bases in China, including Nanxiang production base with automatic sewing unit and electric control, Zhangjiagang production base with medium and thick material machines and Taizhou base with standard products.
Profit forecast
We forecast that the company's operating income will be 2.62 billion yuan / 2.84 billion yuan in 2016 and 2017, an increase of 13.0% and 8.6% respectively over the same period last year. The net profit of the parent company will be 182 million yuan / 207 million yuan, up 15.8% and 13.7% respectively over the same period last year.
Investment suggestion
The company's current stock price (closing price on 2016-03-21: 13.71) is 36 times higher than the 2016 PE in 2016 and 2017. Considering that the company has achieved good results in business integration in Europe, the company has mastered the automation technology of high-end sewing equipment and has a leading edge in domestic demand adjustment and product automation update, we maintain the "buy" rating of the company.
Risk hint
The risk of further integration of Shanggong's European business; the risk of declining demand in the downstream clothing industry; and the risk of business expansion in new areas such as logistics services.