Investment suggestion

We predict that the EPS of the company from 2016 to 2018 is 0.21,0.45 and 0.59 yuan respectively, and the corresponding PE is 49 times, 23 times and 18 times. In 2016, the company's main coal machinery industry stabilized and rebounded, from the supply side and demand side analysis, the rebound trend is expected to continue. The company accelerates the development of new energy vehicles as the second main business, and establishes the development pattern of "creating big cars in the north and energy in the south". With the establishment of operating subsidiaries, the business will be upgraded from "industrial chain" to "ecological circle" in the future. For the first time, we give the company a recommended rating.

Main points of investment

The main industry of coal machinery has rebounded steadily, and the rebound trend will continue: the company is the leading supplier of coal machinery equipment in China, and the market share of products such as shearer and roadheader are in the forefront of the country. Since 2016, the performance of coal machinery equipment enterprises has begun to pick up due to the impact of supply-side reform. The company's products are located in the high-end market, the main customers are large and medium-sized coal enterprises, the gross profit margin is maintained at more than 45% all the year round, and the profitability is leading in the industry, which will significantly benefit from the general trend of low-end capacity replacement. The company's shearer and roadheader are heavy-duty and high-loss equipment, and the general renewal cycle is 5 years. According to the statistics of China Coal Industry Association, 2012-2013 is the peak of fixed asset investment in the coal mining industry. We expect a peak in replacement demand from 2017 to 2018. In addition, the company and Sun Company Saimeng Technology jointly contributed 170 million yuan to set up Zhejiang Chuangli Financial Leasing Co., Ltd., which plans to carry out after-sale and leaseback business on the company's internal assets in the future, which is expected to lead the company's main business to rebound continuously in the next three years.

Set up "Beichuangda" and increase capital of Puyu, accelerate the layout of new energy business: in April 2016, the company invested 51 million yuan (51%) with Hefei Xingyao New Energy and AVIC New Energy Technology Research Institute to set up Hefei Chuangda New Energy Technology Co., Ltd., cut into the new energy vehicle industry chain, and implement the new energy electric vehicle battery package and new energy electric vehicle motor and controller project. It is expected to complete the annual production capacity of 200 million Ah battery PACK (corresponding to 16000 sets) and 30,000 motors and controllers, with annual sales revenue of 1.53 billion yuan and net profit of 130 million yuan. At the same time, the company further accelerates the layout of new energy business, adding 50 million yuan to Chuangli Puyu, a wholly-owned subsidiary, for the construction of new energy vehicle spare parts and charging piles, which is expected to achieve sales income of 160 million yuan and net profit of 20 million yuan after reaching production in 2017.

To cultivate "Nan Yineng" and set up an operating subsidiary, the synergy effect is worth looking forward to: in October 2016, the company's controlling shareholder, China Coal Machinery, acquired a 70.37% stake in Yineng Electronics, and the company has the priority to transfer the equity of Yineng Electronics. Asset injection is expected in 2017. YiNeng Electronics is the leading power battery BMS in China, with a market share of more than 30%, and its main customers are mainstream new energy vehicle manufacturers. With the establishment of the pattern of the company's new energy vehicle business, "North Chuangda, Nan Yineng", it is expected that a strong synergy will be formed in the field of power battery PACK and BMS in the future, helping the company to become the most professional third-party PACK+BMS provider. In September 2016, the company established a new energy vehicle operation subsidiary to strengthen cooperation with the vehicle factory in the form of purchase and operation. at present, the operation project has been landed in the highland provinces of Shanxi and Xi'an, and the annual profit will exceed 10 million. It is expected that the operation business will further strengthen the synergy of the client and realize the upgrading of the company's new energy business from "industrial chain" to "ecological circle".

Risk hint: the demand scale of coal machinery renewal is not as expected; the development of new energy business is not as expected; the subsidy policy of new energy vehicles is adjusted.