I. Overview of events

The company released its 2016 annual report and forecast for the first quarter of 2017, with operating income of 630 million yuan in 2016, an increase of 24.25% over the same period last year. The net profit of shareholders belonging to listed companies was 16 million yuan, an increase of 134.28% over the same period last year. In the first quarter of 2017, the net profit attributable to shareholders of listed companies is expected to be 536.25-5.61 million yuan, compared with 825000 yuan in the same period last year.

II. Analysis and judgment

The gross profit margin of the electromagnetic wire business has increased, and it is planned to strengthen customer and order management to improve profitability in 2016. The company actively adjusted its product structure. Aluminum products increased by 28.67% year-on-year, while copper products fell by 8.41% year-on-year. While keeping the overall electromagnetic wire business income relatively stable, the gross profit margin increased by 2.89% compared with the same period last year. In 2017, the company is expected to improve profitability by strengthening customer and order management: strengthening maintenance and service on the basis of existing customers, strengthening the company's position among customer suppliers, and conducting in-depth evaluation of orders. do not blindly pursue sales scale and improve order efficiency.

Reactor products have been recognized by the market, and the follow-up is expected to gradually contribute to the performance.

The company began to enter the field of reactors in 2015 and completed the identification of high-end products in a short time. The products have twice won the bid for UHV lines of the State Grid, with a total bid amount of about 140 million yuan. In 2016, the operating income of the company's reactor products reached 38.5171 million yuan, an increase of 4833.63% over the same period last year. It is expected that in 2017, the winning products will continue to deliver and contribute to the performance. After having the experience of hanging up the grid, the company's reactor products are expected to continue to win the bid for UHV and UHV projects, and we continue to be optimistic about the development prospects of the company's reactor business.

Proposed merger and acquisition of Xinhuikai to carry out extension expansion in the field of touch display

The company plans to acquire 100% stake in Xinhuikai, extending the business plate to the touch display field, forming a situation of double-main business development. Xinhuikai's products include capacitive touch screen, liquid crystal display module, touch display module and matching ITO glass, cover glass, etc., which are widely used in vehicle display, medical equipment, industrial control and other fields, some of which are supplied to Flextronics, Honeywell International Inc and other top 500 enterprises in the world. The company promised net profit of no less than 113.0143 million yuan in 2017 and 136.5351 million yuan in 2018. We expect that with the support of high-quality customers, the company will be able to achieve performance commitments, and is expected to rely on the financial advantages of listed companies to enhance business scale, improve market competitiveness and market share.

Third, profit forecast and investment suggestions

If the asset restructuring progresses smoothly, according to the estimate of the New Huikai merger Table in 2017, the company's EPS in 17-19 is expected to be 0.44,0.56 and 0.65 yuan respectively, corresponding to 36X, 29X and 25x, respectively. The company is optimistic about the profitability of the company's reactor products and the growth space in the touch display field, and is given a "highly recommended" rating.

IV. Risk hints

Major asset restructuring has the risk of examination and approval and the possibility of termination; the expansion of the reactor market is not up to expectations