2016 annual performance is in line with expectations

Ketai Power announced its annual results in 2016: operating income was 815 million yuan, down 0.3% from the same period last year; net profit attributed to the parent company was 48.46 million yuan, up 17.6% from the same period last year, corresponding to 0.15 yuan per share. The performance is in line with expectations. The company plans to pay a dividend of 1 yuan for every 10 shares. The gross profit margin decreased from 1.8ppt to 19.6%, mainly due to the double decline in power battery income and gross profit margin with high gross profit margin and increased competition in the field of generator sets; during the period, the expense rate increased 7.3ppt, mainly due to a sharp decline in Jetstar income; and non-recurrent income maintained a steady increase in net profit, which mainly included an investment income of about 26 million yuan from the transfer of Jetstar shares.

Trend of development

With the rapid growth of generator sets, the gross profit margin will be slightly under pressure. Sector revenue grew by 27% in 2016.

Orders performed well in the first quarter of 2017, revenue continued to grow, and it is expected to continue to expand market share in the data center sector. In overseas markets, the Hong Kong Ted acquired by the company is expected to contribute more than 5 million yuan in net profit in 2017. However, as competition intensifies and engine imports are affected by the exchange rate, product gross margins will decline.

Dingzeng plan is released, and the electric logistics vehicle operation project is about to start. The company plans to issue no more than 64 million shares and raise no more than 812.6 million yuan for the new energy logistics vehicle operation project. In 2017-19, 11000 electric logistics vehicles and 5500 charging piles will be operated, and an intelligent operation and management platform will be built. The project is expected to have an IRR of 14.44% and a payback period of 4.7 years. Although the company's car purchase cost has risen after the subsidy has gone downhill, the company's leasing business will advance steadily and is expected to promote about 3000 vehicles in 2017, given the cost advantage of electric cars and the strong demand of express delivery companies for electrified replacement of logistics vehicles.

At the same time, the company will continue to invest in the new energy vehicle industry chain, which is expected to provide performance flexibility in the future. However, as the industry is in a period of policy adjustment, the fixed increase still needs the approval of the general meeting of shareholders and the Securities Regulatory Commission, and the company's logistics vehicle business is still uncertain.

Profit forecast

Due to the decline in gross profit margin of generator sets and the lower-than-expected progress in the promotion of logistics vehicles, we have lowered our earnings per share forecasts for 2017 and 2018 by 10% and 6% from 0.22 yuan and 0.31 yuan to 0.20 yuan and 0.29 yuan, respectively.

Valuation and suggestion

At present, the company's share price corresponds to 2017 Universe, 18-year 71 Placement 48x Pax E. We maintained a neutral rating, but lowered our target price by 9.4% to 13.88 yuan, which is 1.56% lower than the current share price. Based on the segment valuation method, the target market capitalization is 4.44 billion yuan, corresponding to 2018 48x Pmax E. If there is a fixed increase in issuance, there is a risk of dilution of performance in the short term.

Risk.

The promotion of electric logistics vehicle operation has slowed down; overseas business expansion is lower than expected.