Event

On the evening of October 25, 2017, Lion Technology released three quarterly reports. During the reporting period, the company achieved 683 million yuan in revenue, an increase of 247.32% over the same period last year, and its net profit was 59 million yuan, an increase of 259.16% over the same period last year.

The performance increased sharply and exceeded expectations, and successively won security business orders.

During the reporting period, the company achieved revenue of 683 million yuan, an increase of 247.32% over the same period last year, and its net profit was 59 million yuan, an increase of 259.16% over the same period last year. Q3 achieved an income of 242 million yuan, an increase of 182.54% over the same period last year, and a net profit of 22 million yuan, an increase of 2008.47% over the same period last year. During the reporting period, the company successively received large orders in the field of security, and signed relevant contracts with the Public Security Bureau of Shule County and Kashgar City in March and April 2017, respectively, with the amount of 80 million yuan and 363 million yuan; in August 2017, the company won the joint bid with Dahua shares for the Ping an City PPP project in Qiemo County, with an amount of 387 million yuan.

Xinjiang security demand is strong, the company will continue to benefit

As the core area of the land Silk Road and the bridge between China and Central Asia, Xinjiang has a large demand gap in infrastructure and stability maintenance. According to the working meeting of the Fifth session of the 12th Xinjiang Autonomous Regional people's Congress and the Economic Conference of the Party Committee, the target of fixed asset investment in Xinjiang in 2017 is 1.5 trillion yuan, an increase of more than 50% over the same period last year, of which the planned investment in urban infrastructure is 195 billion, an increase of 50% over the same period last year. The information industry plans to invest 24 billion yuan, an increase of 71% over the same period last year. Security is a key project in infrastructure and information industry construction. We expect security-related investment to exceed 40 billion yuan in 2017. In order to ensure the stability and development of Belt and Road Initiative and border trade, we expect Xinjiang to continue to increase investment in the field of security, the company will continue to benefit.

The localization advantage of the company is obvious, and the company's new business model is formed by joining the high-quality companies in the industry to participate in the PPP project.

The company has ploughed Xinjiang for 20 years, has obvious localization advantages over companies outside Xinjiang, and ranks first among the system integrators in Xinjiang. On August 18, 2017, the company announced that the company and Dahua shares jointly won the bid for the Ping an City PPP project in Qiemo County, with a total investment of 387 million yuan, operation and maintenance costs of 1721.42 million yuan / year, and a franchise life of 10 years, of which Dahua shares are the project leader and the company is a joint member. The participation of United Dahua shares in the PPP project fully reflects the company's advantages in localization.

Investment suggestion

Taking into account the strong demand for stability maintenance and safety construction in Xinjiang, without considering the merger and acquisition of Xiangjiang Technology, we estimate that the company's profit and EPS for 2017-2019 will be 0.79,1.17 and 175 million yuan, respectively, and the current share price will be 42.8,28.6 and 19.2 times the PE for 17-19, respectively.

Risk hint: the competition in the industry intensifies, and the progress of the security business is not as expected.