Main points of investment

Overview of events

On August 22, 2017, the company released its semi-annual report in 2017. in the first half of the year, the company achieved operating income of 294 million yuan, an increase of 14.39 percent over the same period last year, and a net profit of 70.8406 million yuan belonging to shareholders of listed companies, an increase of 4.74 percent over the same period last year.

Dragged down by the brief downturn of the industry, the growth rate of electric vehicle electronic control business slows down. As a major domestic supplier of electric vehicle motor controller, electric vehicle electronic control business occupies an important position in the market. In the first half of 2017, due to the adjustment of the national subsidy policy for new energy vehicles and the reaffirmation of the subsidy catalogue, the new energy vehicle industry experienced a short-term downturn. Affected by this, the company's electric vehicle electronic control business achieved an operating income of 233.2947 million yuan in the first half of the year, an increase of 16.41% over the same period last year, a significant decline compared with the 165.44% growth rate for the whole of 2016. In addition, the operating cost of the electric vehicle motor controller business increased significantly during the reporting period, resulting in a 7.32 percentage point drop in gross profit margin to 39.89%.

The industrial control industry continues to pick up, and the performance of frequency converter and servo control is expected to show slight growth in 2016, with obvious signs of recovery in the second half of the year; since 2017, the recovery momentum of the industrial control market is still strong. Driven by the prosperity of the industry, the company's medium and low voltage frequency converter business achieved an operating income of 53.4383 million yuan, an increase of 14.36% over the same period last year, with a gross profit margin of 40.12%. In addition, with the advantages of high performance-to-price ratio and localized after-sales service, the influence of domestic mid-and high-end products is gradually increasing, the opportunity to replace the existing market share of foreign brands is increasing, and the market demand will maintain steady growth. At present, the company's frequency converter and servo control business revenue accounts for less than 20% of the company's revenue, and there is still much room for improvement. The company's related business income is expected to achieve a growth rate of about 20% in 2017, and is expected to show a high growth trend in the future.

With the continuous release of the catalogue of recommended models for the promotion and application of new energy vehicles, with the continuous release of the catalogue of recommended models for the promotion and application of new energy vehicles, the industry order began to restore standardization and develop for the better. The catalogue of new energy vehicles exempt from vehicle purchase tax has been released in 11 batches, the mismatch between the two catalogs of passenger cars is alleviating, and the development of passenger cars is expected to accelerate. At the same time, local subsidies are also gradually landing, forming a good policy combination effect. In the first half of 2017, the production and sales of new energy vehicles completed 212000 and 195000 respectively, an increase of 19.7% and 14.4% over the same period last year. It is conservatively estimated that the output of 2017 will reach about 700000, and the market sales will be about 800000. The company's electric vehicle motor controller, which is well-known in the industry, will share a broad market space and is optimistic that the company's main business will return to the track of rapid growth.

Investment rating

It is estimated that the company's income from 2017 to 2019 will be 956 million yuan, 1.263 billion yuan and 1.562 billion yuan respectively, and its net profit will be 227 million yuan, 295 million yuan and 369 million yuan respectively, corresponding to 1.090 yuan, 1.416 yuan and 1.773 yuan for EPS and 24.10,18.56 times and 14.82 times for PE respectively.

Risk hint

1, the competition in the new energy vehicle industry is fierce; 2, the policy landing is not as expected; 3, the recovery of the industrial control industry is not as expected.