Dynamic events:

Citic heavy Industries recently disclosed its annual report that in 2013, the company achieved a total operating income of 5.083 billion yuan, down 29.75% from the same period last year; the net profit attributed to the parent company was 499 million yuan, down 42.63% from the same period last year; and earnings per share was 0.18 yuan. The proposed distribution of 10 shares is 0.58 yuan (including tax). The company will not increase its share capital through provident fund in 2013.

Comments:

The long revenue recognition cycle of a complete set of projects affects the realization of income and profit.

During the reporting period, due to the increasing proportion of domestic and foreign economic downturn and complete sets of projects, and the long implementation cycle, the main economic indicators for the whole of 2013 declined year on year, which was lower than expected. Since the implementation cycle of complete projects is generally more than one year, and it is difficult to recognize revenue from civil construction and installation in complete projects, it will have a certain impact on the realization of revenue and profits in 2013. It is expected that the complete set of projects will bring new growth to the company's revenue and profits in the future. In 2013, the company's unrealized revenue from contract Energy Management (EMC) projects in package orders was nearly 1 billion yuan, which is expected to be gradually recognized in the next few years.

Investment advice:

Maintain a "cautiously overweight" rating on the company over the next six months

It is estimated that the company will achieve earnings per share of 0.23,0.36 and 0.46 yuan respectively from 2014 to 2016. The current stock price corresponds to the dynamic price-to-earnings ratio of 14.29,9.23 and 7.09 times for 2014-2016, respectively, and the valuation within the industry is reasonable. The company closely revolves around the national industrial policy, takes the energy conservation and environmental protection industry and other strategic emerging industries as the development direction, and vigorously expands the energy conservation and environmental protection industry as the focus of marketing. In 2013, the energy conservation and environmental protection industry ordered 2.18 billion yuan, accounting for 19.78% of the new orders in that year. The technology and equipment of the energy conservation and environmental protection industry are expected to become the growth point of the company's performance in the future. We maintain our investment rating on the company to "cautiously overweight" over the next six months.

The main risks suggest: the risk of macroeconomic fluctuations and changes in the operating environment of related industries, the impact of real estate regulation and control policies on the downstream market demand of building materials and equipment, the risk of fluctuation of raw materials and energy prices, market competition and other risks.