According to the company's first quarterly report for 2017, the total operating income in the first quarter was 1.34 billion yuan, an increase of 34.0% over the same period last year. The net profit belonging to shareholders of listed companies was 70 million yuan, up 21.6% over the same period last year. After deducting the net profit belonging to shareholders of listed companies, it increased by 14.1% over the same period last year, and earnings per share was 0.05 yuan, in line with our expectations. The company's main business is growing rapidly, and the investment loss has also been greatly reduced. New energy vehicle is the future development direction, the company in the new energy vehicle industry layout is perfect, the development prospect is bright. New energy vehicle policies have been introduced one after another, and the stability of the policy is conducive to turning losses into profits of Wuzhou Dragon and Jiangsu Carway, and promoting the company's performance growth. In addition, the company joins hands with the right way, the layout of power batteries and new energy vehicles and other areas, the development prospect is promising. We expect the company to earn 0.55 yuan, 0.66 yuan and 0.76 yuan per share respectively from 2017 to 2019, with a reasonable target price of 12.50 yuan to maintain the buy rating.

Support the main points of rating

With the rapid growth of performance in the first quarter, the prospect of high-quality customers is promising. In the first quarter, the company achieved a total operating income of 1.34 billion yuan, an increase of 34.0% over the same period last year; the net profit belonging to shareholders of listed companies was 70 million yuan, an increase of 21.6% over the same period last year, and the performance was in line with expectations. The company's main business is growing rapidly, and the gross profit margin has declined, which is mainly due to the rapid growth of the interior decoration business with relatively low gross profit margin. The investment loss was 30 million yuan, a sharp decrease of 36.2% compared with the same period last year, mainly due to the improvement in the operation of the joint venture company. The company's customers are domestic high-quality vehicle enterprises, the future performance is expected to maintain stable growth.

Join hands on the right path, investment in new energy vehicles is expected to land. The company plans to cooperate with Zhengdao Group to develop power batteries, new energy vehicles and other fields. Through comprehensive cooperation, the company is expected to form the layout of the whole industry chain of new energy vehicles, including power batteries, and is expected to land quickly. Vertical integration has the advantages of strong cost and stable supply, which is expected to help the company to reap fruitful results in the outbreak of new energy vehicles, and the development prospect is promising.

New energy policies have been introduced one after another, and improving the layout is expected to benefit. New energy vehicles are the future development direction, the stability of subsidy policy is conducive to the healthy development of the industry, the frequent introduction of recommended catalogs to promote the rapid growth of sales. The company has a perfect layout in the new energy automobile industry, Wuzhoulong and Jiangsu Carway are expected to turn losses into profits, and the development prospect is bright. In addition, the company strives to promote the listing of Wuzhoulong, Jiangsu Cawei, Wuxi Xingyi and other participating companies, which is expected to obtain rich investment returns and promote the rapid growth of the company's performance.

Main risks faced by rating

1) the business development of new energy vehicles is lower than expected; 2) the business development of internal and external accessories is lower than expected.

Valuation

We expect the company to earn 0.55 yuan, 0.66 yuan and 0.76 yuan per share respectively from 2017 to 2019, with a reasonable target price of 12.50 yuan to maintain the buy rating.