Key points of investment:
Company profile: UPS, photovoltaics, and charging piles have blossomed more and more. The company has long been committed to research in the field of power control and has accumulated rich converter+energy storage technology, thereby extending the layout of related industries such as UPS, inverters, charging piles, etc., and has become the number one domestic brand in the UPS field. In 2017, the company's revenue was 7.318 billion yuan, an increase of 39.51% over the previous year; net profit attributable to owners of the parent company was 714 million yuan, an increase of 51.40% over the previous year. The company's revenue in the first quarter of 2018 was 957 million yuan, an increase of 8.18% over the previous year; net profit attributable to owners of the parent company was 85 million yuan, an increase of 42.94% over the previous year.
Relying on the advantages of UPS, do a good job in the IDC market. The company focuses on high-end power supply products, actively expands the data center market, promotes high-power, modular UPS as key promotion products, gradually escapes vicious competition in the small to medium power UPS market, and becomes a high-tech enterprise based on technical advantages. The company's strategic transformation is aimed at the market demand of IDC data centers, targeting the optimal configuration plan for high-power+online+high-frequency UPS, gradually reducing the small to medium power and offline UPS product lines to obtain higher gross profit margins.
Increase new energy sources and expand the smart microgrid business. New energy has changed the way energy is generated, and energy storage has changed the way energy is used. Many emerging industries, such as wind power generation, power transmission and distribution, smart microgrids, and new energy vehicles, are inseparable from energy storage. Energy storage systems are an important part of networked and independent microgrids, helping microgrids achieve bidirectional flow of capacity. As the promotion of smart microgrids accelerates, the energy storage industry will usher in a period of rapid development. Smart microgrids are the business the company will focus on developing in the future. Currently, the company is also increasing its research efforts, mainly targeting the industrial grade. Currently, the company has completed the South Grid 2MW microgrid demonstration project and is building microgrids in its own production area. The microgrid business can also form synergies with the photovoltaic power plants built by the company to achieve regional distribution and use.
Photovoltaics: It has become a new driving force for the company's performance growth. The company already has nearly 500MW photovoltaic power plants connected to the grid to generate electricity. In November 2017, the company announced that it plans to pay 2.9 billion yuan in cash to purchase 100% of Ningbo Yize's shares. The core assets of the target company are two companies that manufacture photovoltaic modules and cells in Vietnam respectively (Vietnam PV and Vietnam Battery). Through this acquisition, Easystar continues to expand its photovoltaic module and battery manufacturing business upstream based on its photovoltaic inverter, system integration, and power plant operation business. The synergies after integration are expected to enhance the company's profitability and competitiveness in the photovoltaic field. At the same time, the company's industrial layout also extended to Southeast Asia, and the customer base was further globalized.
Charging piles: Benefiting from the explosive growth of new energy vehicles. In 2017, China produced 794,000 new energy vehicles, an increase of 53.6% over the previous year; sales volume was 777,000 vehicles, an increase of 53.3% over the previous year. In 2011, China's NEV production and sales volume was less than 10,000 units. From January to April 2018, China produced 232,000 new energy vehicles, an increase of 1.42 times over the previous year; sales volume was 225,000 units, an increase of 1.49 times over the previous year. The company's traditional main business is UPS power equipment. There are technical commonalities in the manufacturing of charging pile equipment, and it entered quickly in the early stages of the charging equipment market.
Give the company a “carefully recommended” investment rating. We expect the company's EPS to be 0.35 yuan and 0.40 yuan respectively in 2018 and 2019. The current stock price corresponding to PE is 19.8 times and 17.1 times respectively, giving the company a “careful recommendation” investment rating.
Risk warning: Product demand is lower than expected.