Event

The company released its three-quarter report on October 23, with revenue of 149 million yuan during the reporting period, a decrease of 15% over the same period last year, a net profit of 36 million yuan, a decrease of 5.8% over the same period last year, and a non-return net profit of 36 million yuan, a decrease of 5.8% over the same period last year. In the first three quarters, revenue reached 440 million yuan, up 2.5 percent over the same period last year; net profit returned to the home was 110 million yuan, up 0.9 percent over the same period last year; and 110 million yuan was deducted from non-returning net profit, an increase of 0.7 percent over the same period last year.

Brief comment

The sluggish sales of new energy buses are a drag on the company's performance

Affected by the decline of state subsidies, the production and sales of new energy buses continue to be sluggish this year. In the first three quarters, the output of pure electric buses was 28000, down 45 percent from the same period last year, and the output of plug-in buses was 7900, down 19 percent from the same period last year. Production recovered slightly in the third quarter, but it was still in a state of negative year-on-year growth, so the company's electric vehicle electronic control business was greatly affected. Although the fourth quarter is the traditional peak season, the penetration rate of new energy buses has been high, and the potential of the bus market is expected to be limited.

Pure electric logistics vehicles are ready to start, and are expected to become a new growth point.

Affected by the catalogue review and 30,000 km assessment, the logistics vehicle market was relatively deserted in the first half of the year, but the accelerated release mode has been started in the second half of the year. According to the caliber of the energy-saving network, the output of pure electric special purpose vehicles in September was 14000, an increase of 103% over the same period last year and 1003% month on month. In the first three quarters, the output of pure electric special purpose vehicles was 45000, an increase of 37.5% over the same period last year. According to statistics, the total number of public orders for pure electric logistics vehicles in the first nine months of this year has exceeded 130000, so the output of pure electric special purpose vehicles still has a lot of room for growth in the fourth quarter, and the motor controller of pure electric logistics vehicles is expected to lead the company back to growth.

The tightening of subsidy assessment has led to a sharp increase in accounts receivable.

At the end of the reporting period, the accounts receivable of the company reached 420 million yuan, an increase of 56% compared with the beginning of the period, which was due to the slow repayment of downstream car enterprises due to the state subsidy assessment of 30,000 kilometers. At present, the second batch of declaration work of the state subsidy liquidation has begun in 2016, and it is expected that the approval of the state subsidy will greatly improve the cash flow of logistics vehicle enterprises, thereby reducing the company's accounts receivable.

The manufacturing industry recovers under the Jugla cycle, and the industrial control demand side continues to improve in the fourth quarter of 17 years and at the beginning of next year will most likely be in the pullback period of the first inventory cycle of this cycle. Different from the market view, we believe that this industry recovery is not local or sporadic, but global and sustainable, with a recovery cycle of 2-3 years. From the long-term trend, the profits of related companies in the industrial control industry will maintain high growth.

It is estimated that the company's EPS in 17-19 will be 0.98,1.33,1.73 yuan respectively, corresponding to 29,21,16 times of PE. The company will be given a "buy" rating for the first time, with a target price of 33.00 yuan.

Risk Tips:

1. The sales of new energy commercial vehicles fall short of expectations.

2. The recovery of the industrial control industry is not as expected.