Key investment points The main business performance is stable, and joint production income increases net profit. Saijing Power Electronics (0580.HK) announced 2016 interim operating results on August 23: operating income increased 0.5% year on year to 401 million yuan; gross margin level increased to 34.4% from 31.6% in the same period last year; net profit increased 75% year on year to 55 million yuan, earnings per share was 3.98 points, and interim dividends were paid 1 HK cent per share. The company's main business is stable, gross margin has increased, and net profit has improved significantly due to increased real estate income from joint ventures. UHVDC transmission ushered in explosive growth. According to the national grid development plan, 43 UHVDC transmission projects will be built by 2030. Currently, only 6 have been built, so there is huge room for future development. The company's anodic saturated reactors and power capacitors are one of the core components of UHV DC transmission, and it is estimated that they will bring the company more than 400 million yuan in revenue every year. There is also an explosive growth trend in future flexible direct transmission projects, which are expected to contribute more than 1 billion yuan in revenue to the company every year. Acquire Astrol to absorb advanced technology from abroad. The company acquired 65% of the shares of Swiss Astrol in 2016 and turned it into Saijing's European R&D center, continuously absorbing advanced technology from abroad and enhancing the company's core competitiveness. In addition, the company's anodic saturated reactors and other products will be sold overseas along with the National Grid overseas project and the “High Speed Rail Outbound”. One of these projects is close to signing a contract for 8 million kilovolts. With the expansion of overseas projects of the State Grid and CRRC, the company's overseas revenue is expected to continue to grow in the future. Our view: As a leading supplier and integrator of power system solutions in China, Saijing Power Electronics has strong independent R&D capabilities and a high product market share. Domestic UHV transmission projects have ushered in explosive growth, and flexible DC transmission is expected to explode in the future. The company has participated in almost all UHV and flexible direct transmission projects, which is expected to bring the company more than 1.4 billion dollars in revenue every year. Furthermore, the company is actively developing overseas markets, and overseas sales are expected to continue to grow in the future. Investors are advised to pay close attention to the company's 2016 performance corresponding to the current stock price of about 15 times PE. Risk warning: UHV transmission projects and flexible direct transmission projects have not progressed as expected.