Core viewpoints

The performance is in line with expectations. In the first three quarters, the company achieved revenue of 11.6 billion yuan, an increase of 831.1% over the same period last year, and a net profit of 48.03 billion yuan, an increase of 982.8% over the same period last year. Mainly affected by the acquisition of 100% equity in Yongkang Zhongtai in the first half of the year, EPS 0.33 yuan, in line with expectations. At the same time, the company issued an annual report performance forecast: after deducting the first-quarter net profit of Yongkang Zhongtai and the amortization amount estimated by the acquisition of Yongkang Zhongtai this year, the mother net profit was 12.59-1.362 billion yuan, an increase of 1350.7% 1469.4% over the same period last year. Yongkang Zhongtai Motor Company is expected to complete a net profit of 14.3-1.51 billion yuan in 2017.

Earnings rose in the third quarter compared with the previous quarter. In the third quarter, the income was 5.81 billion yuan, an increase of 10.6% from the previous quarter, a net profit of 260 million yuan, an increase of 35% from the previous quarter, and a gross profit margin of 19.2%, an increase of 1.8% over the previous month. The main reason for the continued improvement in profitability is the significant improvement in sales of traditional passenger cars in the third quarter. In the third quarter, driven by demand for T700 and T600, sales of traditional passenger cars reached 71000, up 48.4% from the previous quarter.

Good turnover of assets. In the third quarter, the expense rate of 10.3% of the enterprise period increased by 1.2% compared with the previous quarter, mainly due to the increase in sales and management expenses brought about by the increase in production and sales. The operating cash flow per share was 0.37 yuan, an increase of 744% over the previous month, and the operating situation was improved. The turnover of assets was good. At the end of the third quarter, the company's accounts receivable of 3.74 billion decreased by 3.2%, and inventory of 3.44 billion decreased by 10.9%.

Profit growth of traditional cars and new energy vehicles with two-wheel drive. The company's traditional passenger cars are mainly SUV, and its sales have increased rapidly in recent years. New energy car owners are mainly pure electric vehicles. In the past 16 years, the revenue of traditional cars and new energy vehicles accounted for 79% and 12% respectively. With the month-on-month recovery of SUV sales in the second half of the year, the company is expected to achieve two-wheel drive of traditional cars and new energy vehicles and maintain steady growth.

Financial forecasts and investment suggestions

We forecast 2017-2019 EPS 0.64,1.04,1.32 yuan (the original forecast 2017-2019 EPS0.59, 1.03,1.32 yuan), reference comparable company to give the company 18-year PE average valuation of 19 times, the target price of 19.76 yuan, to maintain the buy rating.

Risk hint

Sales of SUV and other models and new energy vehicles were lower than expected.