Main points of investment:
The intelligent construction of power consumption information collection system promotes the rapid growth of carrier communication industry, and the continuous expansion of technology application field will promote the further expansion of market capacity. The research and development of carrier communication technology in China started late, but developed rapidly. In recent years, with the development of low-voltage centralized meter reading system and the comprehensive construction of power consumption information collection system, the scale of domestic market is expanding rapidly, and its application field is also expanding. At present, the carrier communication collection terminals of the power consumption information collection system of the State Grid Company are independently developed and produced by local enterprises in China. From 2016 to 2020, there will be about 465 million new smart watt-hour meters in China, and the market capacity of smart watt-hour meters is huge. The average proportion of carrier-type smart watt-hour meters in the total number of intelligent watt-hour meters invited by the State Grid Company is about 50%. The market scale of power line carrier communication products in the future is very considerable.
The company is committed to the application of carrier communication technology in the field of national smart grid, and its main business is stable. The company is in the leading level in the research of power line communication media characteristics in China, and its main products are low-voltage power line carrier communication modules (including chips), electricity information collection system collection terminal products and so on. Sales and revenue are realized after embedding software in the above hardware products. From 2013 to 2015, the company's revenue grew at an average annual compound growth rate of 22.96%, achieving rapid growth.
The company has strong competitiveness and obvious position in the industry. Over the past eight years, the company has developed into one of the power line carrier communication technology suppliers approved by the State Grid Corporation (there are only three manufacturers of power line carrier communication technology chips with more than 5% bidding for national grid watt-hour meters, with a total share of more than 80%). Since 2013, products based on carrier communication technology provided by the company have accounted for more than 40% of the application of carrier products in the bidding of watt-hour meters and electricity information collection equipment of the State Grid Company, ranking first in the country. In the future, the company will be transformed into a terminal product with the combination of "software and hardware" to realize the dual-core development of "product + service".
Fund-raising projects to enhance the overall competitiveness. The company raised 608.468 million yuan to invest in "Carrier Communication Product upgrading and industrialization Project", "Comprehensive R & D Center Construction Project", "Marketing and Service Network Construction Project" and other projects. We believe that this fund-raising will further expand the company's production capacity, and can provide richer products and improve the industrial chain according to market demand and technical level, so as to support the sustainable development of the company. In the future bidding competition and the development of new business and new products and services, the company's industry position and market influence will also be greatly consolidated and enhanced.
The estimated reasonable value is higher than the issue price, and it is recommended to apply for purchase. We estimate that the EPS of the company in 2016, 2017 and 2018 will be RMB 0.89,1.00,1.13 respectively. With reference to the valuation of comparable companies in the industry, and considering the valuation premium of Dingxin Communication's leading position and the concept of the Internet of things, we give the company 35x dynamic PE in 2016, corresponding to a value range of RMB31.15-35.60. at present, the company's issue price is RMB14.02, which is lower than the lower limit of the reasonable value range, so we give purchase suggestions.
The main risk. Increased competition in the industry led to a decline in gross profit margin; the progress of fund-raising projects was lower than expected.