Key points of investment

Communication generator sets continued to grow, and the operating performance of new energy vehicles in 2016 was bleak. In 2016, the company's operating income was 815 million yuan, down 0.27% from the previous year; the net profit of the mother was 48 million yuan, an increase of 17.57% over the previous year; the gross profit margin was 19.60%, and the net profit margin was 3.98%, down 1.80 and 2.23 percentage points respectively from the previous year. Among them, the 4Q of 2016 achieved revenue of 254 million yuan in a single quarter, a year-on-year decrease of 19.45%; the net profit of the mother was 34 million yuan, an increase of 49.40% over the previous year; the gross profit margin was 14.99%, and the net interest rate was 12.41%. In 2016, the company was able to achieve positive net profit growth under adverse conditions such as declining subsidies for new energy and vehicles and an impact on sales. The main reasons were: (1) the communication business won new bids for the generator set products required by Telecom and Unicom; (2) the transfer of shares such as Jetstar New Energy to obtain investment income. The gross margin of the new energy and vehicle operation business declined due to the interference of policy uncertainty in 2016, which was a drag on performance.

Consolidate the first-mover advantage of special energy vehicles, and an inflection point in performance is imminent. The company is the core target of “operation+charging” of new energy and vehicles. Its subsidiary, Jietai New Energy, has no longer established cooperative relationships with express delivery companies such as SF Express, EMS, Yunda, Usu, Baijihuitong, and Debon, and has more than 500 operating vehicles. Starting in 2017, the company plans to raise 812 million yuan to invest in the operation of new energy logistics vehicles over 2.5 years. It plans to launch about 11,000 ordinary logistics vehicles and chain logistics vehicles to support the construction of about 5,500 charging stations.

Benefiting from the demand for capacity expansion in the 5G era, the space for expansion in the communications industry has further increased. China will launch the second phase of 5G testing in 2017 and large-scale test networking in 2018, adding a large number of data center construction requirements, which will effectively drive the rapid growth of the company's backup power business.

Investment advice: We forecast that the company's revenue from 2017 to 2019 will be 1,044 million yuan, 1.351 billion yuan and 1,725 billion yuan respectively, with growth rates of 28.1%, 29.3% and 27.7% respectively. Maintaining the investment rating of increasing holdings - A, the target price for 6 months is 1,600 yuan, which is equivalent to the market value of 5.2 billion dollars in 2017 (PS is the average value of 5 for companies of the same type).

Risk warning: The new energy logistics vehicle business is progressing slowly; overseas market expansion is lower than expected.