Events:

The income of New Construction shares in the first three quarters of 2017 was 846 million yuan, down 8.07% from the same period last year, while the net profit of its parent company was 88.363 million yuan, down 1715% from the same period last year. The net profit of non-parent shares was 96.977 million yuan, down 5.2% from the same period last year.

In the third quarter, the single-quarter revenue was 475 million yuan, up 78.84% from the same period last year; the return net profit lost 17.427 million yuan, down 136.85% from the same period last year; and the non-return net profit was 19.165 million yuan, an increase of 38.59% over the same period last year.

At the same time, the company expects full-year net profit of 25 million to 34 million yuan, an increase of 33.67% to 81.8% over the same period last year, mainly due to the growth of sales in emerging industries such as the company's rail transit industry. The company will begin to reverse its performance this year and have plenty of orders on hand. Benefiting from the southwest rail transit strategy led by Chengdu, it has been upgraded to prudent recommendation rating.

Comments:

1. Rail transit vehicle delivery delay affected revenue but increased significantly in a single quarter. The income of newly built shares in the first three quarters of 2017 was 846 million yuan, down 8.07% from the same period last year. It mainly received the impact of rail transit vehicle delivery delay in the first half of the year, and the revenue fell short of expectations. Revenue in the third quarter was 475 million yuan, a year-on-year increase of 78.84%. With the growth of sales in emerging industries such as the company's rail transit industry and the delivery of orders in the second half of the year, revenue is expected to increase step by step, and the annual revenue in 2017 is expected to be the same as last year.

In the first three quarters of 2017, the net profit lost 88.363 million yuan, down 1715.03% from the same period last year. The divestiture of the three construction machinery subsidiaries last year had more investment income and more government subsidies, and the investment income and non-operating income in the first three quarters of this year decreased by 101.24% and 89.27% respectively compared with the same period last year. The net profit and loss of deducting non-return decreased by only 5.2% compared with the same period last year.

During the first three quarters of 2017, the total expenses were 297 million yuan, of which the sales expenses were 54.449 million yuan, down 3.5% from the same period last year; the management expenses were 164 million yuan, down 1.8% from the same period last year, mainly due to the increase in the overall R & D expenditure of 100% low-floor vehicles; and the financial expenses were 78.451 million yuan, down 1.3% from the same period last year.

2. The overall layout of the new industry will blossom at many points.

Bridge functional components contribute to profits steadily over a long period of time. In the future, cash flow will be contributed steadily, and structural optimization will improve gross profit.

Rail transit business has made bold strides. The company announced on October 29 that the company invested 80 million yuan and Panzhihua State Investment Co., Ltd. jointly funded the establishment of Panzhihua Electric Intelligent Air bus Co., Ltd., which will help to promote the rapid development of the company's multi-standard products. The company's rail transit business is full of orders-on-hand, according to the normal progress, it should be confirmed that the revenue should be more than 1 billion this year, optimistic about long-term development.

The performance of the supercapacitor business is eye-catching and continues to expand overseas markets. The 18-meter supercapacitor pure electric city bus jointly developed and produced by Xinzhu and Belarus Municipal Locomotive Factory delivered all 21 buses produced by Minsk bus Group on September 12, demonstrating the company's technical strength of high-energy vehicle supercapacitors and is expected to continue to enter the markets of Russia, CIS and Central Asian countries. The company's supercapacitor business has a high gross profit margin and is expected to achieve its revenue target of 150 million for the whole year, double that of the same period last year.

3. Benefit from Chengdu rail transit strategy and upgrade to prudent recommended rating.

The long-term stable contribution of the company's bridge functional components to profits, rail transit + super capacitor comprehensive layout, multi-point blossom, with technical advantages and integrated investment, construction and transportation service capabilities, will become the main contribution to performance in the future. At the same time, Chengdu has built an important national rail transit base, and plans to achieve 200 billion of the rail transit business income in 2025. The rail transit industry has obvious regional characteristics, and the southwest region led by Chengdu has entered a high-speed development, and the company will benefit directly by virtue of regional and resource advantages. With the quarterly confirmation of rail transit business, the company expects the full-year return net profit to be 25 million to 34 million yuan, an increase of 33.67% to 81.8% over the same period last year. We forecast that the company's 17-18 year return net profit will be 33 million and 140 million respectively, and the 18-year corresponding PE will be 37.4 times, which will be upgraded to prudent recommendation rating.

4. Risk hint: rail transit business revenue is confirmed to be lower than expected, competition intensifies, and raw material prices rise.