Main points of investment:

The company's quarterly results are in line with expectations. The operating income of company Q1-3 was 1.919 billion yuan, up 15.57% from the same period last year. The net profit of shareholders belonging to listed companies was 82 million yuan, down 63.23% from the same period last year, corresponding to 0.10 yuan of EPS. Of this total, the income of the third quarter was 743 million yuan, up 24.90% from the same period last year, and the net profit was 5.5661 million yuan, down 93.6% from the same period last year, corresponding to EPS of 0.007 yuan.

The main business continues the downward trend, and gross profit margin is under pressure. In 2017, the solar water heater industry continued the downward trend in 2016. according to the online data of the industry, the sales of solar water heaters from January to September 2017 were 4.118 million, down 18.18% from the same period last year. In 2017, 3 companies bought 75% of Shuaikang shares with 735 million yuan in cash, contributing more revenue and driving the company's revenue to increase by 15.57% in the first three quarters compared with the same period last year. Shuaikang Electric has established 125 dealers and offices in seven regions across the country, and the kitchen and electricity industry has good growth prospects. Shuaikang business growth is expected in the future. In terms of profit, the company's gross profit margin fell 2.78 percentage points to 37.81% in the first three quarters, and the expense rate rose 5.74 percentage points to 35.26%. Among them, the sales expense rate, management expense rate and financial expense rate increased by 1.25%, 2.64% and 1.85% to 23.97%, 9.97% and 1.32%, respectively, and the net profit rate decreased by 8.69% compared with the same period last year. It is mainly caused by the rising cost and promotion of solar water heater business.

Enter the kitchen electricity business cooperation is strong, solar energy storage business has become a new bright spot. The company's acquisition of Shuaikang is mainly based on the following considerations: 1) the solar water heater industry is in a deep adjustment, hoping to transform and expand to the business of kitchen electricity, water purifiers, air purifiers and other categories, so as to solve the problem of single business and open up new growth points. 2) Shuaikang Electric has high-quality assets: Shuaikang Electric used to be a veteran kitchen and electricity enterprise in China, and was once a leader in the range hood industry in China, and later formed a tripod pattern of Fang Tai, boss and Shuai Kang in high-end kitchen electricity, due to improper diversification and poor management of the company. Shuaikang market share continues to decline, Shuaikang brand power and product quality are excellent, through integration and increased investment, it is expected to regain vitality. 3) the company's water heater management channel was mainly in third-and fourth-tier cities, Shuaikang kitchen electricity channel is mainly in first-and second-line KA, water heater and kitchen appliances are household appliances, the channel overlap is high, and Shuaikang's first-and second-line and the company's third-and fourth-tier cities are highly complementary, and the two sides cooperate strongly after the acquisition.

There is a large market demand for solar energy storage, and the company actively develops cross-seasonal energy storage by adopting PPP and BOT, with main projects focusing on government money to improve residents' heating; previously, the company's solar seasonal heat storage heating project at Hebei University of Economics and Economics was completed in November 2013, and it has been running well for more than 3 years, with an expected payback period of 5-7 years. The company holds hands with Arcon-Sunmark of Denmark to set up a joint venture to provide systematic solutions for China's solar energy cross-seasonal heat storage heating and large-scale solar thermal projects, focusing on large-scale high-end solar systems.

Profit forecast and investment advice. We estimate that the company's earnings per share for the three years from 2017 to 2019 are 0.10,0.11,0.12 yuan respectively (the original value is 0.38,0.42 yuan from 2017 to 2018), and the corresponding price-to-earnings ratios are 86 times, 78 times and 72 times, respectively. The company's kitchen electricity and hot water energy storage business is developing well across seasons, and the investment rating of "increasing holdings" is maintained.