Maintain the "overweight" rating. We believe that there has been a rebound inflection point in the company's business level, and the volume of new products has been released since 2014, maintaining the 2013-15 EPS forecast of 0.08 shock 0.20 and 0.34 yuan, and maintaining the target price of 5 yuan, corresponding to 25 times PE in 2014. Catalysts may include: distribution network construction planning, independent components release, west-to-east gas transmission bidding, Nanqiao land appreciation.
High-end components are the most profitable link in the industrial chain, and there is a broad space for import substitution. Due to high-tech barriers, components have the advantage of pricing power in the primary power distribution industry chain, with a gross profit margin of about 50% for high-end components. We estimate that the annual market capacity of high-end components is 20 billion yuan. At present, all of them are occupied by foreign brands, and there is a wide space for import substitution. Assuming that the company's share can reach 5% in the future, independent high-end components have the potential to recreate a radio and television industry.
The company's R & D, product, brand and channel layout have been completed. The company has laid out high-end components for many years, and at present, the localization of the three frameworks has been completed, and the peak period of pre-R & D and product investment has passed. We expect the business to successfully turn losses into profits in 2013. After years of joint venture experience and brand promotion efforts, the company's high-end brand image has been accepted by customers, the current marketing network construction has formed a certain scale, the number of industry and regional partners is growing.
We expect the components to enter the fast lane of growth, and the performance pull effect is significant. The company's sales are divided into two modes: export and self-sufficiency. With the expansion of the channel, we believe that the company will vigorously promote the increase of self-sufficiency (components account for 30-50% of the cost of switchgear, compared with less than 20% at present). We believe that in 2014, the company's independent components will increase to more than 350 million yuan (a growth rate of more than 75%), while entering the profit harvest period, the business's characteristics of high gross margin, low investment and fast turnover will lead to significant profit flexibility.
Risk factors: the risk of instability in management personnel and the uncertainty of the new business development process.
