[investment points]

What happened: the company reported lower-than-expected revenue and profits for the third quarter of 2015. The company announced that its operating income from January to September was 7.264 billion yuan, an increase of 0.96% over the same period last year. The net profit belonging to shareholders of listed companies was 572 million yuan, an increase of 11.67% over the same period last year. The net profit after deducting non-return net profit was 541 million yuan, an increase of 11.41% and 11.66%. In the third quarter, the operating income was 1.965 billion yuan, down 11.75% from the same period last year, and the net profit was 123 million yuan, down 23.64% from the same period last year. The net profit after deducting non-return was 106 million yuan, down 31.91% from the same period last year. The company reported lower-than-expected revenue and profits in three quarters.

Temporary factors are the main reason for the decline in Q3 revenue and profits compared with the same period last year, and Q4 will return to normal growth. Two temporary factors led to a year-on-year decline in Q3 revenue and profits: (1) a decline in customer demand. Affected by the industry recession, the company's high-end and important customers, such as FAW-Volkswagen, Shanghai Volkswagen, Shanghai General Motors, etc., extended the high-temperature vacation time in Q3, and carried out maintenance, which led to a decline in car production and sales in Q3, which in turn led to a decline in demand for the company's parts. (2) the investment income is misplaced at the time of recognition. The Wanxiang Finance Company held by the company paid 30.32 million and 22.65 million yuan in Q3 dividends in 2014 and 2015 respectively, which affected Q3 profits by about 10 percentage points due to the misalignment of this part of the investment income recognition time. (3) the revenue and profit of Q4 company will return to normal growth. On the one hand, Q4 does not have the problem of investment income of available-for-sale financial assets, and the impact will disappear; on the other hand, the demand of the company's key customers will return to growth under the stimulation of halving the purchase tax, leading to the growth of the company's performance.

The company is actively transforming to new energy automobile parts, and has the expectation of injecting high-quality new energy vehicle assets into the group. (1) the company enters the new energy drive motor business in the form of equity participation. The company invested 110 million in Tianjin Songzheng Company in July 2015. its leading product, new energy drive motor, is one of the three core components of new energy vehicles. the main customers include Yutong bus, Xiamen Jinlong, Xiamen Golden Travel, Suzhou Jinlong, ZTO Express bus and other bus leading enterprises. Tianjin Songzheng has strong technical R & D strength and follow-up development ability, and is one of the leading enterprises in the industry. (2) the group is expected to inject high-quality new energy vehicle assets. Wanxiang Group has injected high-quality assets into the tide of Wanxiang money many times, and has become the main source of the company's performance. The Group currently has a complete industrial chain of battery, motor, electric control and vehicle R & D and manufacturing, and has promised to inject electric vehicle assets into universal money at the right time. At present, new energy vehicles have entered a stage of accelerated development, and the group's high-quality new energy vehicle assets are expected to be injected into listed companies one after another, thus bringing rapid growth in performance.

Profit forecast and investment advice: considering that the company's revenue and profit in the third quarter were lower than expected, we lowered our operating income from 2015 to 2017 to 10.12 billion yuan, 11.09 billion yuan and 12.41 billion yuan respectively, and the return net profit was 829 million yuan, 918 million yuan and 1.032 billion yuan respectively, representing a growth rate of 17.3%, 10.8% and 12.4% respectively, and the corresponding EPS was 0.36,0.40 and 0.45 yuan respectively. Maintain the "overweight" rating.

Risk hints: the macroeconomic downturn leads to a decline in car sales, which in turn leads to a reduction in demand for auto parts and a drop in prices; the uncertainty of injecting universal money into the group's new energy vehicle business; and there are fluctuations in the development of new energy vehicles. Demand is lower than expected.