Main points of investment

The rubber industry recovers and the company's main business bottoms out. The company's three core products-intelligent internal mixer auxiliary system, pneumatic material conveying system and small material automatic batching weighing system are mainly used in rubber refining in the rubber products industry. The company's profits have declined in 15 and 16 years under the influence of the prosperity of the downstream industry, but the marginal improvement of the company's product performance is obvious under the influence of long-term and short-term factors: in the short term, investment in the rubber products industry gradually stabilized after the first decline in 2015. At the same time, under the high pressure of environmental protection, the demand for transformation and upgrading of the original backward production capacity is accelerated, and investment in the rubber refining industry is expected to return to the rising channel. In the long run, with the general trend of automation and intelligence in the manufacturing industry, the demand of intelligent conveying batching system has been improving for a long time, and it is expected to be applied in more industries. The company is the main supplier of intelligent transportation and batching system in the rubber industry, with a market share of about 40%, high market position and competitiveness, and outstanding leading advantages. Considering that the company's intelligent conveying batching system products are non-standard products, there are high barriers and high recognition among downstream well-known customers, the company's market share is expected to rise steadily, leading the main industry to hit bottom and pick up.

At the right time of VOCs governance, the new environmental protection business grew rapidly, and the inflection point of endogenous performance was confirmed. Industry is the key area of VOCs emissions, which is equivalent to the single emissions of SO2, NOx and dust. in recent years, remarkable progress has been made in the control of SO2, NOx and smoke dust, but VOCs emissions still show an increasing trend, and the impact on the atmospheric environment has become increasingly prominent. the recent policy clearly put forward the goal of reducing total emissions by more than 10% in 2020, and the status of VOCs control in "winning the Blue Sky Defense War" has been gradually improved. The governance of each subdivided industry is in its infancy and accelerating development. The company has ploughed the rubber industry for many years, relying on in-depth understanding of the industry and customer advantages to quickly cut into the rubber industry VOCs governance field, the first year of 2016 revenue of 64.4 million yuan, a good start, 2017 revenue is expected to exceed 100 million yuan. At the same time, in the first half of 2017, the company set foot in the manufacturing field of automatic production line of electroplating equipment to provide services for the demand of electroplating equipment in auto parts, electronics and other industries. Customers are expected to enter VOCs governance in automotive and other fields after accumulation, which will further open up the space for business growth. Combined with the recovery of the main business and the company management efficiency improvement plan, the company's endogenous performance inflection point is confirmed.

M & A Qing Investment Intelligence, best-selling products + robot layout opens the space for growth. Qing Investment Intelligence is mainly engaged in the research and development, production and sales of large screen display control systems and intelligent equipment. The compound growth rate of profits in the three years from 2014 to 2016 was 55%. At present, the main business of Qing Investment Deep ploughing large screen splicing increases its market share, the market feedback of smart gun wardrobe and intelligent ski machine in intelligent equipment is good, and the performance is quickly released in the harvest period; the strategic layout of intelligent robot products for downstream industry applications is clear, and now electric power and granary inspection robots have formed products and made certain market breakthroughs. At the same time, CIC promised that the profit for 17 and 18 years would not be less than 5500 yuan and 70 million yuan, and the cumulative profit for the three years from 17 to 19 would not be less than 215 million yuan. The company has now completed the merger and integration of Clearing Investment, and it is expected to add more intelligent genes to the intelligent conveying batching system of the rubber industry, and it is also expected to realize the wider application of Clearing Robot and open up the growth space in the future.

Profit forecast and investment advice. Do not consider additional issuance to raise matching funds for the time being, it is estimated that the EPS in 2017-2019 will be 0.20,0.83,1.10 yuan respectively, and the corresponding PE will be 111,26,20 times respectively. 17 and 18 years will be the turning point of the company's performance, which is expected to change the declining trend and grow rapidly, covering for the first time and giving the "overweight" rating.

Risk hint: rubber industry recovery is not sustainable risk, M & A performance does not meet the expected risk.