Event

1. Zhang Huachi, a wholly owned subsidiary, signed a supply contract with China Wuhuan Engineering Co., Ltd., providing it with ethylene glycol plant for on-site manufacturing towers, with a total contract amount of 54.6 million yuan. 2. The company's recent application for non-public offering shares has been examined and approved by the CSRC.

Comment

The completion of orders increased year-on-year, and the equipment manufacturing business picked up. Subsidiary Zhang Huachi is the platform of Tianwo science and technology equipment manufacturing business and a front-line supplier of domestic high-end non-standard pressure vessel industry, including various specifications of heat exchangers, separators, reactors, evaporators and so on. downstream covers coal chemical, petrochemical, non-ferrous metals and other fields, the market share is stable. The contract order for the manufacture of 5460 million ethylene glycol towers was signed, accounting for 4.6% of the company's 2016 revenue, and delivery is expected to be completed in 2018. In the first half of this year, the company's equipment manufacturing market picked up, and completed and delivered products increased significantly compared with the same period last year. In the first half of this year, revenue reached 910 million yuan, an increase of 168% over the same period last year. Orders for on-hand equipment exceeded 1.8 billion yuan, and the company's equipment manufacturing business rebounded significantly.

Non-public offering examination and approval, Yumen photothermal power generation project has been strongly guaranteed. In March this year, the subsidiary China Machinery Power won the bid "Yumen Zhengjiashawo molten salt tower EPC general contract project for photothermal power generation", with a bid amount of 1.613 billion yuan and a project duration of 19 months. The company intends to take Yumen Xinneng Photothermal first Power Co., Ltd. as the main implementation body, non-public offering to raise no more than 1.572 billion yuan for the construction of the project. The recent non-public offering has been examined and approved by the CSRC, which will provide strong financial support for the company's photothermal power generation project and ensure the smooth implementation of the project. The Yumen photothermal power generation project is one of the first 20 photothermal demonstration projects of the State Energy Administration, which enjoys a preferential benchmarking electricity price of 1.15 yuan per kilowatt-hour, and the generated electricity is purchased by the power grid to ensure the full consumption of the electricity generated by the demonstration project. after the completion of the project, the average annual contribution income is about 200 million yuan and the net profit is 80 million yuan.

The performance of China Mechanical and Electric Power has increased significantly, forming the double main business of "power engineering + reassembly manufacturing". The company achieved a net profit of 206 million in the first three quarters, an increase of 469% over the same period last year, mainly because the company completed the acquisition of 80% of the shares in China Machinery Power in December last year, and the performance of China Machinery Power was included in the consolidated statement, which led to a substantial increase in the overall performance. The company's business has changed from "reassembly manufacturing" to "power engineering general contract + reassembly manufacturing". Among them, the power engineering general contract has become the main business, accounting for more than 82% of the revenue, and the total contract for the project has exceeded 15 billion yuan in the first half of the year. The company's acquisition and integration has progressed steadily, its operating performance has increased significantly compared with the same period last year, and its profitability has been significantly enhanced. The profit for the whole year of 2017 is expected to be 270 million-350 million yuan, a substantial increase over the same period last year.

Profit forecast

We forecast that the company's operating income for 2017-2019 will be 130 picpicure 153 billion yuan, an increase of 990%, 17% and 15% respectively over the same period last year; the net profit of home ownership will be 3.5%, 430 million and 19%, respectively, an increase of 167%, 23% and 19% respectively over the same period last year; and the EPS is 0.45, 0.46 and 0.56 yuan, respectively, and the corresponding PE is 18,17.7 and 14.7 times, respectively.

Investment suggestion

We believe that the company's photothermal power generation projects will definitely increase, and the implementation of the project construction will be strongly guaranteed, which is expected to bring new profit growth points; the company's asset restructuring has been completed, China Machinery and Electric Power has contributed to its performance, and there are sufficient orders on hand, superimposed on the recovery of traditional reassembly manufacturing business, and its performance is expected to increase significantly this year. Maintain the company's "buy" rating with a target price of 14.0 yuan for 6-12 months.

Risk hint

The risk of merger and acquisition business integration, the risk of high asset-liability ratio, and the risk of photothermal power generation project landing.