I. Overview of events

On February 27, the company announced its performance, KuaiBao, with operating income of 592 million yuan, an increase of 37.67% over the same period last year, a net profit of 51.93 million yuan, an increase of 316% over the same period last year, and earnings per share up 301% over the same period last year.

II. Analysis and judgment

1. The benefits of Changzhou Taurus began to merge, and the divestiture of non-main business assets confirmed that the high growth of investment income was mainly due to the consolidation of Changzhou Taurus in November and December, and the high profit growth was mainly due to the disposal of Tiantong automobile equity. It is confirmed that 32.3 million of the investment income and the impact of the consolidated statement, the impact of equity investment income on the performance of the company is one-off, and the consolidated factors of Changzhou Taurus will be sustainable in 2018.

2. The industrialization of high-speed rail brake pads has landed. It is conservatively estimated that the high-speed rail brake pads business of the company with a net profit of 50 million in 2018 has obtained 4.03 million orders, and the industrialization is progressing smoothly. After Xinhongtai failed to acquire Tianyi Shangjia, the company became the target of A-share scarce high-speed rail brake pads. At present, the domestic brake pad market space is about 6 billion yuan, Germany Knorr accounts for more than 70% of the market share, Tianyi accounts for 20%, the industry is in the process of import substitution, the company is a scarce external private supplier of the railway system. At present, the company has a production capacity of 30,000 pieces, and it is expected to add 80,000 pieces of production capacity by June. Assuming a 50% capacity utilization rate and a price of 2000 yuan per piece, the company is expected to achieve a net profit of about 50 million in 2018.

3. Changzhou Taurus has a strong synergy with the main industry. in 2018, the company recently bought 100% equity of Changzhou Taurus Grinding with 1.2 billion yuan, and entered the field of coated abrasives at an issue price of 12.25 yuan per share. according to the net profit promised in 2017, the acquisition of PE is about 15 times, and the net profit of Taurus Grinding from 2017 to 2019 is 82.5 million yuan, 97.5 million yuan and 111 million yuan respectively. The profits of Changzhou Taurus will be fully consolidated in 2018, which will significantly increase the company's performance.

Third, profit forecast and investment suggestions

Based on the diluted share capital, the company's net profit from 2018 to 2019 is expected to be 148 million yuan and 194 million yuan, corresponding to PE of 30x and 23x, maintaining a "highly recommended" rating.

IV. Risk hints

The price of high-speed rail brake pads fell and the project advanced less than expected; Taurus Grinding promised that the performance fell short of expectations.