Key investment points revenue/net profit surged The company achieved revenue of 524 million yuan in the first three quarters, an increase of 391.41% over the previous year, net profit of 41 million yuan, an increase of 250.96% over the previous year, basic earnings per share of 0.12 yuan, and a net sales profit margin of 7.91%, an increase of 5.36 percentage points over the same period last year. Revenue and net profit have skyrocketed. First, they benefited from a sharp increase in general contracting contracts this year. In the first three quarters, the company signed a total contract for a new energy power plant of nearly 250MW; second, Haocheng Electric included mergers to increase revenue. The net sales interest rate increased significantly, mainly because the increase in sales expenses and management expenses (22% and 91%, respectively) was far less than the revenue growth rate (391%). Acquire Haocheng Electric, enter the State Grid bidding system, and establish a new profit point company. In 2015, Haocheng Electric issued 60.6 million shares at a price of 7.42 yuan/share, and acquired 99.93% of Haocheng Electric's shares at a total price of about 450 million yuan. Haocheng Electric is a professional energy-saving and environmentally friendly transmission, distribution and control equipment manufacturer and service provider in China. It is one of the earliest enterprises in China to develop products such as box-type substations, solid-insulated switches, and solid-insulated ring network cabinets. Its main customers are the State Grid and China Southern Power Grid. Through the acquisition of Haocheng Electric, the company entered the national grid bidding system. Haocheng Electric promised a net profit of no less than 45 million yuan and 51 million yuan in 16-17. Judging from the current order volume, there is basically no problem fulfilling the performance promise this year. Actively seeking transformation New energy companies have actively sought transformation in recent years. After selling the high-voltage inverter business in 2015, they have actively deployed new energy fields such as photovoltaics and wind power, achieving a shift from a simple electrical equipment manufacturer to a “manufacturing+operation” model, improving the company's ability to withstand risks. The company acquired 100% of the shares of Wanlong Wind Power and Jiaxing Wind Power through the issuance of shares in September, for a total price of about 258 million yuan. The target company owns a total of 95.25MW wind power plants, was connected to the grid in April of this year, and signed a power purchase agreement with the State Grid. The unit price is 0.59 yuan/kilowatt hour. In September, the controlling shareholders of the company signed a “strategic cooperation agreement” with Shenzhen Qianhai China Power Investment Finance and Fund Management Co., Ltd. and China Power Investment Finance and Financial Leasing Co., Ltd. to establish an industrial investment fund with a total scale of 2 billion yuan within 2 years to invest in new energy projects. We expect that the establishment of this industry fund will bring more EPC general contracting and mergers and acquisitions projects to listed companies. The company plans to hold more than 1 GW of new energy power generation within 3 years, and the power generation revenue will reach 200 million yuan. At the same time, the company has used its advantages to actively enter the field of energy storage and charging stations. The company participated in the preparation of the Harbin New Energy Vehicle Development Plan, and is currently negotiating cooperation with a number of bus companies. Profit forecasts and investment ratings Based on the execution of current orders, we expect revenue for 16-18 to be 1,662 billion yuan, 2,426 billion yuan, and 2,984 billion yuan respectively, net profit of 113 million yuan, 168 million yuan and 208 million yuan, respectively, and earnings per share of 0.33 yuan, 0.49 yuan, and 0.60 yuan. For the first time, coverage gave the company a “buy” rating, and the target price was 13.10-14.10 yuan. Risks suggest that the transition to new energy sources falls short of expectations, macroeconomic downturn, etc.