Events:

On the evening of January 30, the company issued an annual performance forecast for 2018: the company expects to achieve a net profit of-220 million yuan to-260 million yuan for shareholders belonging to listed companies in 2018, and from-235 million yuan to-275 million yuan after deducting non-recurring profits and losses. In the same period last year, the company realized the net profit belonging to the shareholders of the listed company of 19.9926 million yuan, deducting the net profit of non-recurrent profit and loss-5.9995 million yuan.

Main points of investment:

Performance fluctuations are subject to the construction cycle of the communications industry.

The company has been in the field of power technology for more than 20 years. The company's power products are mainly used in communications and data centers, smart energy (including emergency power, photovoltaic, PCS, high voltage frequency converter, energy efficiency management) and new energy electric vehicles and other market areas. The main customers are the world's major telecom operators and Internet enterprises, and the products are widely used in national key construction projects. Including the National Stadium, Olympic Sports Center, Shanghai World Expo, urban subway and so on, and the company's products have been radiated to dozens of countries and regions such as North America, Europe and Southeast Asia, and become one of the mainstream suppliers in the international power market. The company's power technology strength occupies a leading position in the industry, setting up a series of laboratories at home and abroad, and the annual R & D investment accounts for more than 8% of the revenue. As the business accounts for about 70% of the revenue in the field of communication power supply, and the current domestic 4G communication network construction has entered the final stage, the expenditure on the construction of 4G base stations of basic telecommunications enterprises has decreased in 2018, while the construction of 5G base stations has not yet been launched. the demand for domestic communication power market declined, and the company's business revenue declined in 2018, which led to losses in the company's main business. In view of this, it seems that the current performance of the company is strongly related to the periodicity of the communications industry, and has a certain lag impact. However, we also see that since the second half of last year, the commercial process of 5G has been accelerated, from the determination of the standard to the completion of the third phase of testing as scheduled. After entering 2019, operators have begun to open an experimental bureau, purchase 5G base stations and other equipment, communication power products will gradually enter a period of demand growth, which for the company, the demand of the industry has shown a turning point. With the development of 5G network construction of operators, communication power supply will enter a period of rapid growth. On the one hand, the power consumption of 5G devices is much higher than that of 4G devices, on the other hand, the number of base stations will increase more than twice due to the spectrum and technical characteristics of 5G. The multiplier effect formed by these two aspects will bring unprecedented demand growth to the communication power market. The company has an advantage in technology in the communication power market, and its market share has been stable for many years. Therefore, in the future 5G construction cycle, the company is expected to enjoy the dividend brought by the prosperity of the industry.

Optimize the business structure and actively distribute the new energy field

Another reason for the 2018 loss was an one-off spin-off of the company's non-core business. Since the second quarter of 2018, great changes have taken place in the domestic economic environment. The company has adjusted the direction of business development, further focused on the core main business, and divested the non-main business. In recent years, the energy-saving service business and Shenzhen battery factory business, which have been greatly affected by the industry cycle and financial policies, are spun off, most of the energy management projects under construction are terminated, and the related businesses, personnel and assets are disposed of. The corresponding provision for impairment of assets and provision for bad debts are included, thus further increasing the performance loss in 18 years, which accounts for more than 60% of the loss. Although the divestiture of the contract energy management business has brought a large loss, it is a benign promotion to the future development of the company. Because the current technological transformation of major factories has made the market space of this business tend to be saturated, the gross profit margin has declined, and the ratio of input to output has lowered the company's operating efficiency, after this divestiture, the company is expected to lay down its heavy burden and travel light. invest the company's limited superior resources into emerging industries, such as new energy vehicles. In recent years, with years of accumulation in the field of power technology, the company began to devote itself to the R & D and manufacture of new energy vehicle powertrain and vehicle power supply system, and successfully developed hydrogen power vehicle DC-DC power supply, pure electric animal flow car motor drive system, passenger car charger, vehicle DC-DC power supply and other automotive parts products and successfully realized the application and matching. At the same time, it has core technical advantages in AC charging pile, DC charging pile, charging pile operation and management platform, and realizes the solution of full-coverage electric vehicle system for customers. at present, it has established strategic cooperation with Beijing Yihuatong, Aerospace Science and Industry and Anhui tomorrow hydrogen Energy and other companies. The company's main customers of this kind of products are Dongfeng shares, Dongfeng special merchants, Beijing Yihuatong, Weichai, Dalian Jingyan, Anhui tomorrow hydrogen Energy, Xiamen Jinlong and many other domestic enterprises. And cooperate with the world-renowned hydrogen fuel companies in the United States and Germany. After this year's internal deep-seated business optimization, the company will comprehensively develop the electric vehicle business market, expand the intensive business market share, and expand new marketing channels. According to the company's business plan, the new energy vehicle business will account for about 1/3 of the company's total business in the next few years, thus forming a new revenue and profit growth point of the company. In addition, the company also relies on its own smart energy technical strength to actively develop distributed energy storage business, and is expected to promote the application in Xiongan construction.

Profit and forecast

Considering that the communication industry is in the early stage of 5G, the demand for communication power products is still in its infancy, the company's power products will be in a steady pick-up period in the next two years, and new energy products will also be in the promotion period. the pull of the company's short-term performance is limited, but it is of great significance to the company's long-term development. After the business adjustment in 2018 and the re-integration of the company's resources, we are optimistic about the development trend of the company in the next three years. It is estimated that the company's revenue will reach 1.334 billion yuan and 1.801 billion yuan in 2019-2020, with a corresponding net profit of 2075 million yuan and 53.71 million yuan. Give the company an "overweight" rating.

Risk hint: 5G network construction is not as expected, operators'5G power procurement is not as expected, and the progress of new energy vehicle business is not as expected.