According to the 2017 interim report, the company achieved a total operating income of 2.63 billion yuan in the first half of the year, an increase of 18.4% over the same period last year; net profit belonging to shareholders of listed companies was 170 million yuan, down 14.3% from the same period last year; earnings per share was 0.17 yuan, which was lower than we expected. The income growth in the first half of the year is mainly due to the rapid growth of accessories, functional parts and other business, and the decline in profits is mainly due to the substantial increase in financial expenses, as well as the losses of participating companies such as Shenzhen Wuzhoulong, Changchun New Energy, Jiangsu Carway and so on. The company owns 35% equity of Jiangsu Cawei, 38.4% of Shenzhen Wuzhoulong and 35% of Changchun New Energy, invests in Ningbo Jingwei Power Battery Co., Ltd., and plans to invest in the construction of high-end electric vehicle R & D and production base in Germany. New energy is the future development direction of automobiles, the company has a perfect layout in the new energy automobile industry, but it will take time for the company to contribute profits.
Due to the lower-than-expected sales of new energy vehicles and other factors, we lowered the company's profit forecast to 0.27,0.36 and 0.45 yuan per share respectively from 2017 to 2019, giving a price-to-earnings ratio of 30 times earnings in 2017 and lowering the reasonable target price to 7.80. the rating was downgraded to cautious buying.
Support the main points of rating
China reported a rapid increase in revenue and a decline in net profit. The company's operating income in the first half of the year increased by 18.4% compared with the same period last year, mainly due to the rapid growth of exterior accessories, functional parts and other business. The net profit of homing fell 14.3% compared with the same period last year, mainly due to a sharp increase in financial expenses, a decline in the gross profit margin of the main business, and losses caused by lower-than-expected sales of new energy vehicles such as Shenzhen Wuzhoulong, Jiangsu Cawei and Changchun New Energy.
The layout of new energy vehicles is perfect, and it will take time for them to contribute profits. The company owns 35% of Jiangsu Cawei, 38.4% of Shenzhen Wuzhoulong and 35% of Changchun New Energy, invests 540 million to set up Ningbo Jingwei Power Battery Co., Ltd., and plans to invest in the construction of a high-end electric vehicle R & D and production base in Germany. New energy is the future development direction of automobiles, the company has a perfect layout in the new energy vehicle industry, including new energy buses, logistics vehicles, passenger cars, batteries and other links, but it will take time to contribute profits.
Main risks faced by rating
1) the business development of internal and external accessories is lower than expected; 2) the business development of new energy vehicles is lower than expected.
Valuation
We expect the company to earn 0.27,0.36 and 0.45 yuan per share respectively from 2017 to 2019, giving a price-to-earnings ratio of 30 times earnings in 2017, lowering the reasonable target price from 8.70 yuan to 7.80 yuan, and downgrading to cautious buying.