Investment suggestion

We predict that the EPS of the company from 2017 to 2019 is 0.49,0.63 and 0.75 yuan respectively, and the corresponding PE is 57 times, 44 times and 37 times respectively. The company's performance doubled in 2016, mainly due to the rapid growth of industrial automation and power automation business, and the combination of Guanzhi Automation and Huaxiao Precision May-December results. The company has the layout of the whole industry chain in the field of intelligent industrial production, and is a power automation system supplier and technical service provider who has mastered the core technology. The strategic layout of "artificial intelligence + health" is quite interesting. Maintain the recommended rating.

Main points of investment

The performance was in line with expectations, and revenue and net profit doubled: in 2016, the company achieved a total operating income of 1.73 billion yuan, an increase of 102.12% over the same period last year; operating profit of 301.14 million yuan, an increase of 89.81% over the same period last year; total profit of 324.68 million yuan, an increase of 85.38% over the same period last year; and net profit belonging to shareholders of listed companies was 276.73 million yuan, an increase of 102.46% over the same period last year. The doubling of revenue and net profit is mainly due to the fact that the company's industrial automation business continues to maintain a stable and good development trend, and the new merger of Guanzhi Automation and Huaxiao Precision's operating results from May to December 2016, at the same time, the operating income of electric power automation also achieved a large increase compared with the same period last year. The company's sales expenses in 2016 were 107 million yuan, an increase of 48.73% over the same period last year; management expenses were 220 million yuan, an increase of 58.14% over the same period last year; and financial expenses were-950000 yuan, an increase of 84.02% over the same period last year. The net cash flow of business activities was 58.14 million yuan, down 63.98% from the same period last year, mainly due to the merger of Guanzhi Automation and Huaxiao Precision, resulting in an increase in cash outflows such as purchasing goods to receive labor services, paying wages and taxes over the same period last year. The increase in cash received from the sale of goods and the provision of services is lower than the increase in cash outflow. At the same time, the company released a forecast of first-quarter results, which is expected to make a profit of 4218 to 49.21 million yuan in the first quarter, an increase of 20 percent over the same period last year.

The substantial growth of industrial automation business has promoted the strategic layout of "artificial intelligence plus health": in 2016, the company's industrial automation business achieved revenue of 993 million yuan, an increase of 134.80% over the same period last year, and the gross profit margin of sales was 40.23%, down 3.77% from the same period last year. The company's industrial automation business has a complete industrial chain of "intelligent transfer manipulator (hand)-AGV (foot)-flexible production line (body)". The products are widely used in automotive, electric power, military industry, machinery and equipment, new energy, energy saving and environmental protection, electronic information and other industries. It is one of the few domestic enterprises that can provide comprehensive solutions for customized chemical industry automation. Looking to the future, the company will promote the strategic layout of "artificial intelligence + health". The company has joined hands with the Institute of brain Intelligence Science and Technology of Fudan University to build Fudan-University of Science and Technology Intelligent Robot Joint Laboratory. The laboratory team will carry out the industrialization of scientific research projects in many aspects, such as deep learning, human-computer interaction, big data analysis and so on. In the future, the company will actively promote the industrialization of scientific research projects, realize the strategic layout of "artificial intelligence + health", and actively introduce and incubate a number of domestic and foreign scientific and technological innovation enterprises with top technology, so as to give full play to the enabling effect of artificial intelligence.

The electric power automation business is still developing at a high speed, and the gross profit has declined due to the intensification of downstream competition: in 2016, the company's electric power automation business realized revenue of 673 million yuan, an increase of 56.79% over the same period last year, and a gross profit margin of 35.97%, down 7.31% from the same period last year. This is mainly under the background of the overall economic situation of the country and the further intensification of market competition in the power automation industry, resulting in a larger increase in operating costs compared with the same period last year. The main products of the company's power automation business are power distribution and rail transit electrical automation products, including distribution automation systems, power consumption automation systems, distribution automation engineering and technical services, inspection robots, new energy access control and energy saving management, rail transit power equipment and data communication products. It is the main supplier and technical service provider of electric power automation system, which is familiar with the operation status of distribution network and core technology in China. In the electric power field, it can provide customized distribution automation products and system comprehensive solutions for power industry users, and further improve the power supply reliability and automation level of China's power grid; in the field of new energy, it can realize the integration and innovation of traditional technology and Internet technology, solve the problems of storage, conversion and dispatching in energy Internet management, and achieve the goal of green energy saving and reducing conversion energy consumption.

Risk tips: downstream demand, especially the power industry demand decline, enterprise management integration and management risk.