Results in the first three quarters of 2017 are in line with expectations
Aoyang Technology announced its results for the first three quarters of 2017: operating revenue was 4 billion, up 15.7% from the same period last year; net profit attributed to the parent company was 170 million, down 15% from the same period last year, corresponding to earnings per share of 0.23 yuan.
In the third quarter, the average price of viscose staple fiber fell 6% compared with the same period last year, and the gross profit decreased 3.27ppt compared with the same period last year, resulting in a 30% year-on-year drop in net profit per quarter, excellent cost control and 1.99ppt decline in three fees compared with the same period last year.
Trend of development
The demand for viscose staple fiber is stable and the industry starts to resume. In September, with the end of environmental protection inspection, the industry load rebounded, the average load was about 92%, and the downstream inventory was about 12 days, and the market trend tended to be flat. At present, the average price of 1.5D market is 15800 yuan / ton, the price difference is 7715 yuan / ton, and the price of raw materials rises slightly to support the price of viscose staple fiber. The Ministry of Industry and Information Technology issued the Viscose Fiber Industry Standard conditions (version 2017) on August 9, which made higher requirements for industry access conditions, and it is expected that the new production capacity will slow down in the future, which will benefit the leading enterprises in the industry. At present, the company has a production capacity of 300000 tons, and Funing Aoyang, a holding subsidiary, plans to invest 160,000 tons / year differential viscose project to improve product structure, phase out some backward production capacity and improve overall profitability.
The layout of a large health industry, and the dual-main business model is gradually taking shape. The layout of the company's large health industrial chain is becoming more and more perfect and has two-wheel drive. at present, four general hospitals under the company have begun operation, opening a total of 2200 beds, while Xuzhou Aoyang Huaan Rehabilitation Hospital was officially opened on August 15, 2017. in the future, the company will also speed up the construction of rehabilitation hospitals in Zhangjiagang, Huzhou and other cities to speed up remote replication to form regional competitiveness in East China.
Profit forecast
We have lowered our earnings per share forecasts for 2017 and 2018 by 6 per cent and 6 per cent respectively from RMB0.34 and RMB0.4 to RMB0.32 and Rmb0.38 respectively.
Valuation and suggestion
At present, the company's share price corresponds to 2017 23.5x/19.8x 18-year Universe E. We maintain our recommended rating, but lower our target price by 5.26% to RMB 9.00, which is 20% upside from the current share price. The target price corresponds to the 2017 28x/24x Placer E for 18 years.
Risk
The price of viscose staple fiber and its raw materials fluctuated greatly; the development of large health industry did not meet expectations; the valuation center moved down.