[Anxin Securities] Jicheng Electronics: Performance growth is in line with expectations, deployment of microgrids, and collaborative development of electricity, water, and gas businesses

安信證券 ·  10/28/2016  · Researches

Event: according to the company's three-quarter report, in the first three quarters of 2016, the company achieved operating income of 903 million yuan, an increase of 22.73% over the same period last year; net profit of 79.6489 million yuan, up 10.19% over the same period last year, and net operating cash flow of-391 million yuan; operating income of 381 million yuan in the third quarter, an increase of 15.84% over the same period last year, and net profit of 59.5826 million yuan, an increase of 12.94% over the same period last year. The company expects full-year net profit to range from 0% to 30%.

The company's comprehensive gross profit margin was 43%, up 2.13 pct. The company's sales / management / financial expenses are 1.81 / 14 million yuan respectively, which is 168% higher than that of the same period last year. The rate is 2.77max 1.39max 0.86 pct over the same period last year. The increase in sales expenses is due to the increase in the company's engineering and maintenance expenses, and the increase in management expenses is due to the increase in the salary, welfare and social security expenditure of managers.

With the opening of the starting gun of the distribution network, the company, as a leading manufacturer of secondary equipment, welcomes a new opportunity: the important core supporting document of power reform, "measures for orderly liberalization of Distribution Network Business Management", has been officially promulgated, sounding the horn of the distribution network opening to social capital. We think that companies that give priority to high-quality distribution network projects (the opening of distribution network makes social capital have profit space from equipment construction to follow-up operation and operation and maintenance) There will be a clear performance. Incremental distribution network assets (new + "non-grid system" stock) this is the first time to liberalize to social capital, and the opportunity is rare. According to the China report, the company's substation and power distribution automation business account for about 74%. In the context of the opening up of the incremental distribution network, the company, as a general contractor of social capital design and distribution network projects, has more opportunities to participate in follow-up operations and integrated power distribution operations. substation business is expected to continue to maintain steady growth, while power distribution business is expected to maintain rapid growth.

The business of gas and water automation is growing rapidly, and the coordinated development of electricity, water and gas is expected: the company's automation solutions in the field of gas cover more than 100 gas enterprises in more than 20 provinces and cities across the country. It is currently one of the largest suppliers of gas automation systems in China. Good reputation and rich customer resources help the company to maintain a leading edge in the future.

In the field of water automation, the company's related products have successfully developed water markets in important cities such as Wuhan, Chongqing and Urumqi. Combined with multi-advantage companies, the "three meters in one" system scheme of electricity, water and gas is currently cooperating and actively developing with each other. After the successful application of the first three meters in one pilot project in Changzhou, the company has successively landed in Chongqing, Yangzhou, Zhengzhou, Leshan and other places, and has been launched in more than ten prefectures and cities across the country, leading in market share. In the future, with the promotion of honeycomb narrowband Internet of things technology, the permeability of smart gas meters and smart water meters is expected to increase significantly, and the company already has the first opportunity.

The energy management system independently developed by the company has been successfully applied in large energy-consuming enterprises such as Shandong Laigang, Weichai Power, Chenming Paper, etc., with remarkable energy-saving effect, and undertakes the construction project of energy-saving information system platform in Shandong Province. On June 30 this year, the Ministry of Industry and Information Technology formally issued the "measures for the Management of Industrial Energy Saving". Under the general trend of stricter national energy conservation policies, the energy management needs of enterprises and the energy-saving supervision system regulated by the government are expected to be released gradually, at the same time, with the promotion of the new electricity reform, more large industrial and commercial users (including high-tech enterprises) will also have higher requirements for energy conservation, and the market demand for refined and efficient energy-saving management will continue to rise.

Increasing investment in micro-energy network operation, services and smart grid automation upgrading: from the perspective of energy utilization, all kinds of energy in China are currently evolving towards decentralization and interconnection. The state has issued documents to speed up the construction of energy Internet demonstration projects, and we expect the promotion of microgrid construction to be accelerated. From the perspective of power grid structure, China's power grid is forming a large power grid mixed with AC, high voltage and direct current, the system is becoming more and more complex, and the requirements for measurement, control and protection are higher and higher. The company has raised no more than 773 million to invest in microgrid energy (390 million) and smart grid automation upgrade (150 million) to cultivate profit points for the company's future growth.

Set up an industrial fund with the Linyi government and SIIC Venture Capital, set up a new company to invest in pharmaceutical information projects: the company announced and SISCO Venture Capital (wholly owned by Shanghai Real Group) jointly set up a company to participate in the Linyi government and Yinan County to set up a "Linyi New Energy Industry guidance Fund" with a scale of 1 billion yuan. invest in new energy, energy saving and environmental protection, information technology, new materials, advanced equipment manufacturing, modern service industry and other strategic emerging industries The company recently announced with "Dongyuan Huaxin" a total of 100 million yuan (80 million) to set up a limited partnership, and then set up a project company, with the project company as the main body to invest in local medical information projects. The company's move aims to rely on its core technology and engineering experience accumulated in industry information software development and system integration business to expand to the field of pharmaceutical information, hoping to cultivate new growth points of performance.

Investment suggestion: we are optimistic about the layout of the company's comprehensive utility automation service providers and energy microgrid and expect the company to benefit more under the background of incremental distribution network liberalization. it is estimated that the company's EPS (excluding additional issuance) from 2016 to 2018 will be 0.43,0.53,0.60 yuan respectively, maintaining the "buy-A" rating, with a target price of 27.50 yuan.

Risk hints: power grid construction is not as expected, product market competition is intensified, and power reform policies are not as expected.

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