The overall revenue grew steadily, and the net profit growth rate was lower than the income due to the decline of gross profit margin. 2017H1 realized revenue / return net profit of 294 million / 71 million yuan respectively, an increase of 14.39% and 4.74% respectively over the same period last year. Among them, the revenue of electric control of new energy vehicles reached 233 million yuan (+ 16.41%), which maintained a high growth in the case of depressed production and marketing of downstream electric vehicles affected by subsidies, accounting for 79.25%, contributing to the main revenue of the company; medium and low voltage frequency converters achieved revenue of 53 million yuan (+ 14.36%), mainly benefiting from the recovery of the industrial control industry. During the reporting period, the comprehensive gross profit margin of the company's products was 40.34%, down 6.08 pcts from the same period last year, mainly due to the decline in prices; the sales expense rate increased by 1.06 pcts to 7.05%, mainly due to the increase in sales rebate; and the management expense rate also increased by 0.21 pct to 11.14%, mainly due to the increase in R & D expenses.

Sales of electric commercial vehicles are expected to break out, benefiting third-party electronic control manufacturers with technical strength. Affected by the subsidized slope and the "30,000 km" policy in the first half of the year, the production and sales of new energy commercial vehicles dropped sharply compared with the same period last year. In June, sales of new energy commercial vehicles increased for the first time this year compared with the same period last year, and sales in July were 12000 (+ 79.4%). The industry is clearly picking up. In the second half of the year, with the gradual implementation of land subsidies and the landing of new energy buses around the country, the release of commercial vehicles is just around the corner. There are many manufacturers involved in the motor electric control industry of new energy vehicles, and there are not many third-party suppliers with leading technology, especially in the field of passenger vehicles. We believe that in the future, with the refinement of the division of labor in the new energy vehicle industry chain, the third-party electronic control suppliers with technical advantages, integration capabilities and cost control advantages will stand out.

Logistics vehicle electric control faucet, active layout in the field of passenger cars. Most of the company's research and management team comes from Huawei Electric (Emerson), which has outstanding advantages in research and technology, and takes the lead in entering the field of electric vehicle motor controller in the industry, relying on advanced frequency conversion and servo technology. it has obvious advantages in the electronic control market of new energy commercial vehicles, especially logistics vehicles. As the core member of Waterma Innovation Alliance, the company has high-quality customer resources. At present, special-purpose vehicle customers include Dongfeng, FAW, Universiade, etc., and bus customers include Jinlong, Ankai, Wuzhoulong and other mainstream car companies. In the face of the upcoming electric passenger car market, the company is actively increasing R & D investment and technology reserves. at present, the electronic control prototype of new energy passenger vehicles has been successfully developed and is in negotiation with 6-7 customers, which is expected to generate income in 2018 and become a new growth point of the company's performance.

Fund-raising projects have progressed steadily, and traditional business has benefited from the recovery of industrial control. The company plans to invest 66.52 million yuan to set up a new production base in Xiamen. After it is put into production, it will add an additional motor controller / medium and low voltage frequency converter / servo drive with an annual production capacity of 5500 units. It is expected that with the gradual release of the production capacity of the fund-raising project, it will lead to the rapid growth of the company's business. With the recovery of downstream manufacturing, the industrial control industry has continued to recover since the second half of 2016, judging that the recovery will be sustainable, and the company's medium and low voltage frequency converter and servo drive business is expected to achieve steady growth.

Risk factors: 1) decline risk of subsidies for new energy vehicles; 2) competition aggravates the risk that gross profit margin continues to decline.

Profit forecast, valuation and investment rating. The company is the electronic control leader of new energy commercial vehicles, accumulating a large number of high-quality customers, and its income still maintained a high growth in the first half of the year despite a sharp decline in the production and sales of electric commercial vehicles compared with the same period last year, reflecting the company's high product competitiveness and market development ability. the release of commercial vehicles in the second half of the year will bring greater performance flexibility for the company. The company actively lays out the field of passenger cars, and the related product prototypes have been successfully developed, which is expected to become a new performance flashpoint. It is predicted that the 18-year net profit in 2017 is 296 million yuan for PE, and the annual net profit for 2017-18-19 is 2.01 yuan for EPS. The current stock price corresponds to 29Compare, 19max and 13x respectively. Give a "buy" rating for the first time, with a target price of 33 yuan, corresponding to 17 years of PE35x.