Investment highlights once again covered Zhongheng Electric Company (002364), which gave it an outperforming industry rating. The target price is 13.80 yuan, corresponding to 57/36x P/E in 2019/2020. The reasons are as follows: The company's core focus is that the communication power supply business has ushered in an inflection point in the industry. Performance is highly flexible, and other businesses have maintained relatively good growth. The acceleration of 5G base station construction combined with the doubling of the power of a single station brings about 5 times the market space for communication power supplies in 2021 compared to 2018. IDC's market size has maintained a growth rate of nearly 30%, and the trend of large-scale expansion is obvious, which is beneficial to the HVDC power supply business with excellent energy efficiency. Charging piles collaborate with Didi, and power informatization benefits from the ubiquitous Internet of Things. Large-scale data center (IDC) and 5G construction are driving the growth of high-voltage DC power supply and traditional communication power supply business. The construction of 5G base stations began in 2019, and the industry space could reach nearly 20 billion yuan in 2021, a fivefold increase compared to 2018, favoring the company's traditional communication power supply and HVDC power supply. The acceleration of large-scale IDC construction favors the company's HVDC power supply. The company's HVDC supply share in 2018 was nearly 50%, with a single order amount of 300 million yuan. The ubiquitous power Internet of Things is driving the growth of power informatization investment, and the company's power software business has benefited from the industry wave. The CAGR of China's power informatization investment from 2006 to 2016 reached 20%, and software and applications accounted for 43%. In 2019, the State Grid proposed that ubiquitous power IoT is expected to drive structural growth in power grid informatization investment. The growth rate of the company's software business recovered in 2017-2018, and we believe that after 2019, it will benefit from the industry wave. Charging piles have entered Didi's supply system, benefiting from the acceleration of operator charging pile construction. After 2018, operator demand for charging stations became dominant. The company is Didi Xiaoju's main charging station supplier. Didi plans that the number of pure electric vehicle fleets will reach 1 million in 2020, and the Xiaoju charging platform will expand simultaneously, which will bring about continued demand for charging equipment. What is our biggest difference from the market? We believe HVDC will benefit from increased penetration and be driven by industry growth. 5G base stations, on the other hand, have brought about a rapid increase in market space and unleashed performance elasticity. Potential catalysts: 5G construction accelerates, HVDC orders land, and Didi's charging demand accelerates. Profit forecast and valuation We expect the company's EPS from 2019 to 2021 to be 0.24 yuan, 0.38 yuan, and 0.54 yuan, respectively, and CAGR of 49.5%. We expect net profit from the mother to reach 137/2.14/306 million yuan in 2019/2020/2021. The current stock price is 12.06 yuan, corresponding to 49.7/31.8x P/E in 2019 and 2020. Under the SOTP valuation, the communication power system/power information/operating power supply system was given 35x/35x/25x P/E in 2020, corresponding to the market value of 7.776 billion yuan and the target price of 13.80 yuan. There is room for 14.4% increase from the current price. Once again, coverage gave it a rating that outperformed the industry. Risk HVDC order completion progress fell short of expectations, and 5G base station orders fell short of expectations.