Core views

Far from announcing its 2016 semi-annual report on the evening of August 29, the company achieved revenue of 800 million yuan in the first half of the year, an increase of 125% over the previous year, reflecting the popularity of Toyota hybrid models driven sales of nickel-metal hydride batteries. In the same period, the company recorded a loss of 64 million yuan, an increase from last year's loss of 36 million yuan. This is mainly due to the fact that government subsidies were high during the same period last year, and second, Toyota's business has not reached the break-even point and has yet to make a profit contribution.

Looking ahead to the second half of the year, we expect profits to improve, considering that government subsidies are concentrated in the second half of the year, and Toyota's business is about to enter break-even. From a subject point of view, we expect the Emgrand EC7 hybrid to be launched in September and October. The launch of this model marks the beginning of the industrialization of Keliyuan's CHS hybrid technology and is expected to boost market confidence.

Hybrids, including conventional hybrids and plug-in hybrids, are important energy saving and new energy technologies, just like pure electric technology. We maintained our 2016-20 net profit estimates of 100 million yuan, 200 million yuan, 400 million yuan, 600 million yuan, and 1.2 billion yuan respectively, to achieve leaps and bounds. Reiterate the “buy” rating and the target price of 17 yuan.

Risk warning: The launch of the Emgrand EC7 Hybrid may be later than expected, sales of Toyota hybrid models will fall short of expectations, China's new fuel consumption regulations or new energy credit regulations may be unfavorable to the company, and government subsidies may be less than expected.