Main points of investment

1. The gross profit margin of the main products is relatively high, and the sales cost rises sharply.

The company's main products are low-voltage power line carrier communication modules and acquisition terminal equipment, which are mainly used in the power consumption information collection system of the national smart grid. The gross profit margin of the carrier module (including chips), which make up the company's main source of income, is as high as 65%, which is higher than the company's comprehensive gross profit margin. The share of the main customer State Grid continues to increase, becoming the company's largest customer in the first half of 2016, accounting for 8.61%. In order to expand the sales coverage and further open the market, the sales cost increased significantly from 2015 to 2016.

two。 Benefiting from the intelligence of the power consumption information collection system and the high degree of industry concentration since 2013, there are only 3 manufacturers of power line carrier communication technology chips that have applied more than 5% in the bidding of watt-hour meters of the State Grid Company. in total, the bidding share of watt-hour meters of State Grid Company is more than 80%, and the industry market concentration is high. From 2016 to 2020, there will be about 465 million new smart watt-hour meters in China, and the market capacity of smart watt-hour meters is huge. According to the bidding information statistics of the State Grid Company, the average proportion of the number of carrier smart watt-hour meters in the total number of intelligent watt-hour meters invited by the State Grid Company is about 50%, and the market scale of power line carrier communication products in the future is very considerable.

3. Investment advice:

It is estimated that the revenue growth in 2016-2018 will be 32%, 25% and 23%. The net profit in 2016-2018 is 280 million yuan, 364 million yuan and 482 million yuan respectively, corresponding to 59 times, 46 times and 35 times of PE. Give a recommended rating.

4. Risk Tips:

Market competition risk; carrier communication product price and gross profit margin decline risk; downstream customers over-reliance.