Events:
Up to now, the asset purchase of Jiuzhou Electric's non-public offering has reached the feedback stage of the Securities Regulatory Commission. The company plans to purchase its 100% stake in Wanlong Wind Power and 100% stake in Jiaxing Wind Power in the form of non-public offering shares from the counterparty Renewal Investment, Australia and Canada Energy and Liu Leizhi, at a conversion price of 10.43 yuan per share. The total share consideration of the two projects is 257 million yuan, and the project capacity is 95.25MW.
Main points of investment:
Cooperate to set up industrial funds, listed companies and industrial funds jointly benefit from scale growth through new energy EPC projects.
The operation mode of the company's new energy EPC is to cooperate with strong enterprises to set up an industrial fund, rely on its funds, resources and other strength to invest in new energy projects, the company undertakes the EPC project. After the completion of the new energy project, the company will purchase the capital of the industrial fund partners in the project by issuing shares to buy assets, and the company will continue to operate the new energy project to make a profit. In this way, the company obtains the double benefits of EPC and operation, while the fund partner obtains the equity of the listed company, invests in the listed company for a long time, and benefits from the growth of the listed company and the increment of the equity. (for specific cases currently carried out by the company, see Appendix 1) projects carried out with this model can be highly replicable. at present, the company has cooperated with Guodian Investment Corporation to successfully use this model to realize the grid connection of new energy EPC projects about 100MW, and gradually promote the acquisition of it by listed companies. At the same time, the two sides have signed a strategic agreement for follow-up cooperation, and we believe that the company will continue this model to promote scale growth and achieve sustained and steady growth in revenue and profits.
The company is expected to increase the number of new EPC installations to more than 250MW in 2017, on the basis of about 100-130MW in 2016. After 2017, the company is expected to install about 300MW-400MW in new projects every year, and the installed capacity will reach 1GW within three years. Cooperation with industrial funds to build and gradually inject the company's assets will become a stable source of operating profits for the company. In addition, we believe that the company can replicate this model to areas other than new energy EPC to achieve long-term sustainable growth.
Traditional power equipment manufacturers transformed into new energy EPC and service providers, Haocheng Electric merged watch, the company regained its vitality. Since going public in 2010, the company's revenue and profit bottomed out in 2014 and lost money for the first time in 2014. The decline in revenue was due to the company's sale of its high-voltage frequency converter business to Rockwell Automation in 2012, and the first loss in 2014 was mainly due to additional costs from moving to a new production base and opening up new markets. In 2015, the company acquired a 99.93% stake in Haocheng Electric. Haocheng Electric promised that its net profit in 2015, 2016 and 2017 would not be less than 37.5 million yuan, 45 million yuan and 51 million yuan respectively. Benefiting from the merger of Haocheng Electric, as well as the promotion of the new energy EPC project and revenue recognition, the company expects net profit in 2016 to be 1.35-141 million yuan, a year-on-year increase of 571.68% 601.53%. Exceed market expectations and the target of unlocking conditions for the company's equity (non-net profit deducted by the company from 2015 to 2017 is not less than 30 million yuan, 100 million yuan, 200 million yuan).
With the introduction of lead-carbon battery technology from Harbin University of Technology, the energy storage business is expected to become a new growth point for the company's performance.
On December 2, 2016, the company signed the Strategic Cooperation Agreement for the Establishment of a Joint Laboratory with Harbin Institute of Technology, which focuses on the application of lead-carbon superbatteries in the field of energy storage and power. In January 2017, the company established a joint venture with Professor Wang Dianlong of Harbin University of Technology, Harbin Jiuzhou Energy Storage Technology Co., Ltd., the energy storage company will focus on the R & D, manufacturing and sales of high-performance lead-carbon batteries, lead-acid batteries and their positive and negative materials. Jiuzhou Electric's joint laboratory and energy storage company will improve the company's lead-carbon energy storage battery manufacturing and R & D capabilities, and further implement the company's strategic development plan and industrial layout of electrical equipment manufacturing, new energy power generation, energy storage and intelligent microgrid. In December 2016, the company signed the Strategic Cooperation Framework Agreement for Electric Energy Storage Project with Tailai County, which plans to build 30MW energy storage project. In the future, it is expected that the company will continue to make efforts in the field of energy storage, making the energy storage business another new growth point of the company.
Profit forecast and investment rating: maintain buy rating. We are optimistic about the rapid growth of the company's scale and profits after straightening out the business model. Without considering the impact of this fixed increase on equity and performance, we estimate that the EPS of the company in 2016, 2017 and 2018 will be RMB 0.38,0.67,1.04respectively, corresponding to the current PE of 34x, 19x and 12x respectively. Maintain a "buy" rating.
Risk tips: traditional business development is lower than expected; EPC project development is lower than expected; energy storage is lower than expected; the company's implementation of additional issuance is uncertain.