The annual report in 18 was in line with market expectations, and the quarterly report in 1919 began to improve.

The company recently released its 2018 annual performance report and 2019 first quarterly report. According to the 2018 annual report, the company's operating income was 910 million yuan, down 25.56 percent from the same period last year; net profit loss was 280 million yuan, compared with 19.9926 million yuan in the same period last year, with a loss of 0.5 yuan per share. The first-quarter report of 2019 showed that the company's operating income was 167 million yuan, an increase of 14.53% over the same period last year; the net loss was 18.3876 million yuan, compared with a loss of 32.4245 million yuan in the same period last year, reducing the loss by 43.31%. That is, a loss of 0.033 yuan per share. The company's annual report and quarterly report are in line with expectations.

Adjusting the business structure to withstand short-term labor pains, the business bright spot is still outstanding.

Over the years, the company has been focused on power electronics technology-related product research and development, manufacturing, sales and related technical services. In mid-2018, the external economic situation was complex and grim, with 4G construction closing cycle superimposed, 4G base station construction expenditure reduced, 5G base station construction not yet started, domestic communication power market demand declined, and the company's communications business segment business revenue declined. the main business is losing money. At the same time, the company divested the energy-saving service business and Shenzhen battery factory business, and made provision for impairment of assets and provision for bad debts. Two effects led to a huge loss of 280 million in 2018. However, this is also a reflection of the effect of the company's business reform-- putting aside the burden and moving forward light.

Although the company is facing multiple operating pressures, we can see from the annual report that the company's operation in 2018 still has bright spots: 1) adjust the development direction at the strategic level, divest non-core businesses, and fully withdraw from the contract energy management projects currently under construction, focusing on the three main industries of data communications, smart energy and new energy vehicles. 2) deepen the internal incentive mechanism, implement the partnership system, and take the lead in implementing the system in the electric vehicle business to fully stimulate enterprise vitality and improve operating efficiency; 3) based on Xiongan New area, layout of smart energy business-the company takes Xiongan smart city construction as an opportunity to comprehensively land technologies, products and overall solutions in smart energy business for many years. Over the past 18 years, the company has successfully built a number of smart energy demonstration projects with Petrochina Company Limited, Iron Tower and other customers, and achieved good practice and social effects.

After 18 years of adjustment, we can also see the effect of this business direction adjustment from the company's quarterly operating data: in the first quarter of this year, the company's main revenue increased by 14.53% compared with the same period last year, while operating costs increased by only 9.61%. Financial expenses only increased by 12.4%, sales expenses decreased by 22.47%, which shows that the company has improved its efficiency in internal management. In the same period, management expenses increased by 26.98%, and R & D expenses increased by 38.33%, accounting for 11.50% of total revenue, accounting for 2 percentage points higher than the same period last year. This shows that the company continues to increase investment in R & D. The first quarter belongs to the off-season of the company's operation, and the power collection of operators has not yet been fully carried out. At the beginning of the year, the company mainly made preparations for this year's collection, with fewer orders confirmed, and normal amortization of expenses, especially the increase in management and R & D expenses. This has led to a loss in the quarter, but the improvement in internal efficiency has reduced the loss by 43.31% compared with the same period last year. With the recent acquisition of operators and the landing of related projects, the company's second-quarter revenue is expected to accelerate, operating performance is expected to become positive.

Deep accumulation of power supply technology and establishment of intelligent manufacturing system

As a company that has been for more than 20 years, the company has unique advantages in technology and management. In the technical research and product development of power supply, the company has formed a technical platform with different power levels from small power to high power, which provides a technical guarantee for the rapid transformation of customer demand into products. The company has set up three major R & D centers in Beijing, Shenzhen and Harbin, with R & D personnel accounting for 30% of the total number of R & D personnel, ensuring high product innovation and development capabilities. The company through IPD integrated product development system construction, customer demand-driven, multi-domain parallel, full-process product development, effectively improve the success rate of R & D project development. By the end of 2018, the company has participated in the formulation of more than 50 national or industry standards for various types of power supplies, and has obtained more than 200 patents and software copyrights.

The supply chain system of electronic enterprises is very important, which directly affects the improvement of product quality, shortening the delivery cycle and improving the ability of customer service, and has a decisive impact on their own profitability. Since the beginning of this year, with the further expansion of the company's main business, the scale effect of raw material procurement and product production has been gradually magnified, and the company's product cost advantage will be further highlighted; at the same time, because different products have similar production processes, the company can flexibly deploy production capacity among production lines to cope with periodic production peaks and respond quickly to market demand. In terms of suppliers, the company has a strong competitive advantage in raw material procurement through the company-level strategic project procurement e-commerce platform, which provides a strong guarantee for cost control. In addition, the company has comprehensively promoted the upgrading of the "intelligent manufacturing factory" in Anhui, introduced a number of fully automatic production lines, imported fully automatic testing equipment such as AOI/ICT/ATE and MES manufacturing execution system, and realized the tracking of the whole process bar code system of the company's products. By reflecting the product straight-through rate of each link of daily production to the management layer of the company, we can effectively control the product quality and realize the overall optimal management of the production process.

Focus on the main energy industry, relying on overseas markets and 5G cycle to regain growth

At present, the company's core products are three major industries: data communications, smart energy and new energy vehicles, providing customers with products, overall solutions and complete lifecycle services in the three major industries. Among the existing core products, communication power products have a high market share, and the company is one of the core suppliers of major telecom operators and tower companies in the world; EPS products and modular power products are also in a leading position in the industry. In addition, focusing on the development and utilization of new energy, the company has launched a full range of vehicle power products and power system assembly products, as well as DC-DC power supply and fully sealed liquid-cooled charging modules for hydrogen fuel cells, which have become industry stars.

The area where the company has made a major breakthrough in its business over the past 18 years is overseas sales. The company's communication power supply products have been successfully applied to telecom operators in nearly 50 countries and regions, and their sales scale and profits have increased significantly compared with the same period last year. Among them, a sales contract of US $20.67 million has been signed with Russian customers, occupying the first share of the Russian communication power supply market. It has cooperated with equipment manufacturers such as Telenor, E.CO and Zong of Norway Telecom to carry out supporting sales for major customers. At the same time, with the promotion of global 5G business and the construction of base stations, the company's 5G power solutions have made breakthroughs in South Korea and some EU countries and regions, which lays the foundation for the further large-scale development of overseas business in the future.

With the opening of the 5G construction cycle, the company's communications business line management team continues to dig deep into the industry market, refine services and supporting facilities, and actively develop new products with the product development path of "high efficiency", "intelligent" and "Internet of things". The development of the company's new generation of "intelligent" communication infrastructure operation and maintenance platform "power cloud" is completed, which integrates power environment monitoring. And combine the power cloud with big data Center to improve the operation capability of the platform. At present, the actual scene application of the overall combination of photovoltaic base station and hybrid energy power integration system has been completed, and the station has been successfully built and operated. The 5G micro-module and the micro-station power supply have been successfully launched, and the functions and application scenarios of the 240cm 336V high-voltage DC power supply have been improved, laying the foundation for strategic transformation.

Profit 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 expected that the company's revenue will reach 1.319 billion yuan, 1.846 billion yuan and 2.493 billion yuan in 2019-2021, with a corresponding return net profit of 48.23 million yuan, 144 million yuan and 2.17 yuan. Give the company a "buy" rating.

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