Main points of investment:

The company's performance exceeded expectations in 2015. The company's net profit belonging to shareholders of listed companies in 2015 is expected to increase by about 1015% compared with the same period last year. As a result, we expect the company's homing net profit to be 114 million in 2015. The company's net profit in the first three quarters was-59.83 million, resulting in a net profit of about 173 million yuan in the fourth quarter. According to our analysis and forecast, the after-tax non-profit and loss of the company in 2015 will be 155 million (the increased income from the transfer of land use rights and real estate in Shenyang Economic and technological Development Zone in May 2015. The agreement stipulates that the income will be recognized in stages from May to the end of the year according to the pace of land use rights, housing property registration, regional land listing and other complete transfers, and all recognition has been completed by December 31, 2015. after deducting the 110 million unearned profit and loss shown in the first three quarterly reports, the unearned profit and loss in the fourth quarter of 2015 will reach 45 million yuan. As a result, the recurrent net profit for the fourth quarter of 2015 is expected to be 128 million, a substantial profit that exceeds expectations.

The company's operating performance will increase significantly in the fourth quarter, which we believe will mainly benefit from the company's determination and ability to seize industry opportunities to firmly develop new energy vehicle strategy, selling more than 1500 new energy vehicles in the fourth quarter, an increase of about 3600% over the same period last year, and is expected to achieve a net profit of 110 million. We expect dawning axles to contribute 70 million in net profit for the whole year and about 18 million in the fourth quarter. Changzhou Huanghai bus, as the main subsidiary of Dandong Huanghai, is mainly responsible for the production and sales of traditional large tourist buses and buses, but its original diesel and LNG buses do not keep up with the pace of national policy, resulting in a certain loss, which is expected to be about 40 million in 2015. the company sold all its shares in December and is expected to recognize the investment income at one time in 2016. In short, after deducting the net profit of about 40 million of the annual loss of the sold Changzhou Huanghai bus in 2015, the company is expected to make an overall operating turnaround.

Compared with 2013 and 2014, the performance increased significantly in 2015, mainly due to the significant improvement in capacity utilization of the company. Since the beginning of the company's plan to develop new energy in 2012, nearly 2 billion yuan has been invested in the preparation of equipment and plant. By September 2015, it is estimated that only about 200 new energy buses will be produced. The annual amortization of a large number of equipment and factories is nearly 100 million, coupled with extremely low capacity utilization, resulting in poor operating performance of the company in 2013 and 2014. However, 1705 new energy vehicles were sold in the fourth quarter of 2015, which greatly improved the company's capacity utilization level and brought a strong improvement to the company's performance.

We expect the company to achieve a total net profit of 530 million yuan in 2016, with a market capitalization of 7 billion yuan after considering the rights issue, with a valuation of less than 20 times in 2016. Among them, the performance of dawning headquarters will continue to grow rapidly, and the most conservative operating net profit is expected to be 200 million yuan. We predict that Yineng Electronics will contribute 200 million in equity net profit to the company. Changzhou Huanghai, which went on sale in December 2015, is expected to recognize 150 million yuan in after-tax non-recurrent profit or loss in 2016. Dawning headquarters is expected to realize the sales of 7000 new energy vehicles (including 2000 passenger cars and 5000 logistics vehicles). Calculated according to the net profit of 50, 000 yuan for passenger cars and 10, 000 yuan for logistics vehicles, new energy will contribute 150 million yuan to the company's operating net profit, plus dawning axles contribute about 70 million yuan to the company's annual net profit, minus 40 million of the possible loss on traditional buses. Dawning headquarters can make a net operating profit of about 200 million. At the same time, with the merger of Yineng Electronics in 2016, it has also brought huge profits for the company. The neutral estimate of Yineng in 2016 is expected to achieve 2.5 billion revenue and 250 million net profit, and the net profit contributed to the company's equity is about 200 million yuan. In addition, about 150 million yuan after non-recurrent profit and loss tax, it is predicted that the company will achieve a total net profit of 530 million yuan in 2016.

Raise earnings forecasts and maintain buy ratings. From 2015 to 2017, we expect revenue of 5.404 billion yuan, 8.397 billion yuan and 10.864 billion yuan respectively, and corresponding net profit of 114 million yuan, 530 million yuan and 594 million yuan respectively. After considering the IPO, the corresponding EPS is 0.18,0.84 and 0.94 yuan respectively, and the corresponding PE is 56 times, 12 times and 11 times respectively.