Liyuan Refining (002501) information update

Introduction to this report:

    The Chairman's plan to increase his shareholding in the Company and the important shareholder Great Wall Guorong's previous raising of cards all highlight his confidence in the future of the Company.

    The order of frame parts for Indonesian sightseeing cars is highly recognized by customers, and is expected to continue to receive orders for 18 years. Maintain the target price of 17.02 yuan.

    Key investment points:

    Maintain the rating of "overweight", with a target price of 17.02 yuan. On February 23, the company announced that Wang Min, the chairman of the board of directors, planned to choose an opportunity to increase his holdings in the next six months, with an amount range of 50 million yuan to 100 million yuan.

    The large proportion of shareholding increase of senior executives reflects their confidence in the future prospects of the company and their belief that the current value of the company is undervalued. In December 2017, the order for frame parts of Indonesian sightseeing cars was highly recognized, and it is expected to continue to obtain orders in large quantities in 18 years. The sample vehicles of the whole vehicle planned to come out before and after the Spring Festival are expected to be delayed due to the delay of the design scheme. Based on this, the net profit forecast for 17/18 years is lowered to 612/747 million yuan, and the corresponding EPS is adjusted to 0.5/0.62 yuan (- 12.1%/- 27.1%), maintaining the target price of 17.02 yuan.

    The increase of senior executives' holdings and the raising of important shareholders' cards will boost confidence, and the transformation will finally usher in the dawn. The chairman of the board of directors planned to increase his holding of the company's shares before the restrictions on sales of fixed increase shares were lifted, showing his recognition of the company's long-term value. At present, the chairman of the board holds 176 million shares, accounting for 14.48% of the total share capital. The shareholding ratio is not high. This increase is calculated at the latest closing price of 8.98 yuan, which is equivalent to 0.46-0.92% of the total share capital increase. Previously, Great Wall Guorong raised its brand, and its related parties held 5.01% shares in total.

    Senior executives and important shareholders have successively increased their holdings, which shows that the current stock price is very attractive. Considering the company's follow-up rail transit vehicle sales strategy, it is possible to continue to introduce new strategic investors.

    The order of car body parts is continuous, and the sample vehicle of the whole vehicle is late but will arrive eventually. The 24 sections of sightseeing car frame parts supplied by the company to Indonesia through Zhangjiagang Terui have been delivered in succession, and the delivered parts have been highly recognized by customers. We believe that this order is only a small batch trial supply, and it is expected that a large batch supply will come in 18 years, and the order sustainability of the car shell and deep processing business will lay the foundation for performance growth. The company's rail transit vehicle manufacturing system has met the needs of producing sample vehicles. It is expected that the sample vehicles will be produced before and after the Spring Festival, but the sample vehicles may be delayed due to capital, design scheme and other reasons.

    Catalyst: the acceleration of subway construction in Northeast China has brought procurement demand; Order of body frame parts.

    Core risk: rail transit vehicle acceptance progress is slower than expected.