I. Overview of events

The company released its semi-annual report of 2016, with operating income of 351 million yuan in the first half of 2016, an increase of 46.74 percent over the same period last year, and net profit of 7.5072 million yuan for shareholders of listed companies, an increase of 26.44 percent over the same period last year.

II. Analysis and judgment

High-end copper core electromagnetic wire products led to the company's revenue growth, transposed aluminum wire year-on-year unchanged during the reporting period, the company achieved business income of 351.7025 million yuan, up 46.74% over the same period last year, mainly due to the company's high-end copper core electromagnetic wire product orders, transposed copper wire, copper composite wire sales showed a good momentum of growth, led to the growth of the company's revenue. The external sales of the core product transposed aluminum wire are basically the same as those of the same period last year.

Reactor products gradually contribute to performance, overseas market active development in the upper half of the year subsidiary Zhengneng Electric Organization Ximeng-Taizhou, Shanghai Miao-Shandong ±800kV UHVDC project reactor production, is expected to deliver in the second half of the year to confirm revenue, Changji-Guquan ±1100kV UHVDC project reactor technical design program of more than 8000 million orders has passed the design freeze meeting organized by the State Grid, is expected to contribute performance next year. The company's reactor products are expected to continue to win the bid after having the experience of hanging the net. due to the small performance base of the company, we continue to be optimistic about the performance flexibility of the company's reactor products during the peak period of UHV project construction. Overseas, Zhengneng Electric has signed 8 product agents in North America (2 in Canada and 6 in the United States), creating conditions for the company to further develop the international reactor market.

Suspension of trading and planning of major asset restructuring, extension is worth paying attention to. The company issued a major asset restructuring suspension notice on August 1, 2016, initially confirming that it intends to acquire a company engaged in the research, development, production and sales of liquid crystal display and touch display modules, and intends to acquire some or all of the shareholders of the target company. So far, the scope of the underlying assets involved in this transaction is still under careful discussion and has not been finalized. This major asset restructuring is another extension attempt after the termination of the non-public offering. It is suggested that we should continue to pay attention to the possible extension expansion of the company to improve the growth space of the company.

Third, profit forecast and investment suggestions:

The company's 16-18 EPS is expected to be 0.07,0.11 and 0.18 yuan respectively, corresponding to PE of 204X, 130X and 79X, maintaining a "cautious recommendation" rating.

Fourth, risk tips:

The investment in power grid construction is not up to expectations, the expansion of the reactor market is not up to expectations, and there is great uncertainty in the reorganization of major assets.