Investment advice

We predict that the EPS of the company from 2017 to 2019 is 0.17,0.21 and 0.24 yuan respectively, and the corresponding PE is 50 times, 43 times and 37 times. In 2016, the company's performance was in line with expectations, the layout of the three major business sectors gradually improved, and the oil and gas services and smart industries developed rapidly. The first quarter of 2017 was affected by the law of cyclical income, resulting in a pre-loss. We maintain the company's recommended rating.

The performance was in line with expectations, and the layout of the three major business sectors gradually improved: the company issued the 2016 annual report and the first quarter of 2017 performance forecast, and announced the profit distribution plan at the same time. During the reporting period, the company laid out three major sectors, such as automation, oil and gas services and intelligent industry, to provide customers with independent products, industry solutions and services. In 2016, the company achieved a main business income of 935 million yuan, an increase of 70.67% over the same period last year, and a net profit of 86.3167 million yuan, an increase of 7.68% over the same period last year. The proportion of income in the three major business sectors is balanced, mainly due to the company's increased efforts to expand the market. and acquired 100% equity interest in Bluebird Electronics and 52.40% equity in Sanda New Technology, which improved the layout of oil and gas services and wisdom industry. The company's first-quarter performance loss of 19.0681 million yuan to 17.5427 million yuan in 2017 is mainly affected by the periodic income law of the industry, and the revenue accounts for a relatively small proportion in the first quarter. In addition, in order to ensure long-term development, the company distributes a cash dividend of 0.30 yuan (including tax) to all shareholders for every 10 shares, and uses the capital accumulation fund to increase 6 shares for every 10 shares for all shareholders.

The revenue of automation business declined, and the performance of oil and gas automation business was stable: during the reporting period, the company's automation revenue was 248 million yuan, down 32.04% from the same period last year, and the proportion of business income was 26.49%. This is mainly due to the impact of large-scale boiler automation projects in Xinjiang in 2015. In the general environment of the continuous downturn of international oil prices and the reduction of domestic oil field investment, the company's oil and gas field automation business income remains stable. In addition, the company has also made breakthroughs and progress in some new industries and fields, overseas won the bid for the integrated instrument electric sleigh project of the LNG receiving station in Kasim Port, Pakistan, and the pipeline automation business won the bid for Henan Yuzhou gas Yuanmu to Yuzhuang pipeline project SCADA automatic control system and other projects. The field of coalbed methane automation has won the bid for the second phase of the surface gathering project of 200 million square rolling trial production in the west of Daji 5-6 well area in Daning Jixian block. the company's products and service capabilities have been highly recognized by users.

Oil and gas services are located in the middle and high end, with a substantial increase in revenue: during the reporting period, the company's revenue from oil and gas services reached 345 million yuan, an increase of 157.50% over the same period last year, and the proportion of business revenue rose from 24.48% to 36.94%. Under the environment of the continuous downturn of international oil prices and the relative shrinkage of domestic oil field investment, the demand for low-end MWD instruments and technical services is saturated, and the demand for middle and high-end instruments and services is increasing. On the basis of ensuring the original business, the company has further increased the investment in high-end equipment and services, and developed to "high-end, sophisticated and sophisticated" technology. The subsidiary Zetian Shenghai won the bid fracturing and horizontal well technical services in Xinjiang, obtained LWD market access in Chuanqing drilling, and obtained rotation-oriented market access in Zhongyuan Oilfield, which laid a good foundation for the development of the company's oil and gas service business.

With the rapid growth of the intelligent industry, smart buildings and smart grain depots blossomed at many points: during the reporting period, the company's revenue from the intelligent industry was 337 million yuan, an increase of 637.16% over the same period last year, and the proportion of income increased from 8.35% to 36.07%. The company wholly-owned grandson company Bluebird electronic intelligent building project newly signed the intelligent system engineering of the new building of China Zheshang Bank head office (Qianjiang New Town), the intelligent project of the first phase of rural high-rise housing in Qianjin Industrial Park, and its intelligent building business composition has also changed from single to diversified, from residential district to hotel, hospital, bank, government and other types of customers. Zhengzhou Xinsheng's "Henan Zhengzhou Xinglong National Grain Depot Intelligent upgrade Project" played an obvious demonstration role, expanded the market from point to area, and successfully won the bid for intelligent grain depot projects such as nitrogen filling and controlled grain storage system procurement of Jiumei Central Grain Depot in Nanjing County. The sales revenue of this sector has increased rapidly, and there is more room for growth in the future.

Risk hint: the speed and scale of investment in the oil industry is not as fast as expected, and the development of the intelligent industry is not as expected.