Items:

1. The company released its semi-annual report for 2019. In the first half of 2019, the company achieved an operating income of 399.0745 million yuan, an increase of 25.75% over the same period last year; an operating profit of 49.3446 million yuan, an increase of 67.83% over the same period last year; a total profit of 49.2404 million yuan, an increase of 61.69% over the same period last year; and a net profit of 42.9878 million yuan, an increase of 61.13% over the same period last year. two。 Shenzhen Collier Sports Control Technology Co., Ltd., a wholly-owned subsidiary of the company, has completed industrial and commercial registration.

Guoxin Chemical's viewpoint:

1) the company is expected to benefit from the rapid growth of domestic demand for high-end micro-special motors. The company is a leading enterprise of micro and special motors in China, with an annual production capacity of more than 45 million sets, of which the annual production and sales of single-phase shield motors are more than 36 million sets, which is in a leading position in China. As the core component of converting electric energy into kinetic energy, micro-special motor is widely used in many fields, such as household appliances, office automation, security monitoring, medical devices, industrial automation and robots, and so on. At present, the market space of the industry is about 280 billion. It will maintain a growth rate of 15% in the next 3-5 years. From a technical point of view, the demand for high-end micro-special motors (with energy saving and environmental protection, mechatronics, intelligence and high reliability) is gradually increasing. Therefore, we believe that domestic leading enterprises with both high-end micro-special motor production capacity and cost-effective advantages are expected to accelerate to replace domestic low-end production capacity, while entering overseas markets to expand market share.

2) the artificial intelligence robot industry is about to break out, and the demand for servo motor is expected to grow rapidly. In 2019, the government work report focused on the development of artificial intelligence industry to enable the transformation and upgrading of the manufacturing industry. Servo system is the core component of artificial intelligence robot. The research and development of artificial intelligence servo system is very difficult, and the core technology has been controlled in Japan, Germany, the United States and other developed countries for a long time. As a new high-tech enterprise, the company's products have been recognized by customers such as Samsung of South Korea, Panasonic of Japan, GM of the United States and so on. At present, 80% of the market share of servo motor is monopolized by foreign companies, and there is a lot of room for import substitution. The company has established Shenzhen Collier Motion Control Technology Co., Ltd., which is expected to speed up technology research and development and take the lead in promoting the localization of servo motors in the field of artificial intelligence robots.

3) 2019H1's performance is growing rapidly, export sales are growing steadily, and the structure of domestic customers is optimized. The sharp increase in 2019H1's performance was mainly due to a surge in sales orders.

The sales revenue of the company's single-phase cover pole motor (including cross-flow fan) reached 278.8466 million yuan, an increase of 20.86% over the same period last year, and the sales revenue of series motor reached 91.4192 million yuan, an increase of 39.15% over the same period last year. Sales revenue of stepper motors, brushless DC motors, servo motors and other products also increased rapidly, up 78.08% from the same period last year. In terms of customer structure, export sales increased steadily, with sales revenue of 135.8667 million yuan in Europe, an increase of 32.83 percent over the same period last year, and 106.5133 million yuan in America, an increase of 20.59 percent over the same period last year. The domestic market is dominated by domestic high-end brand household appliances, and the customer structure is further optimized. In the future, the company will further increase the continuous R & D and market expansion of products such as stepper motors, brushless DC motors and servo systems, create new growth points, and gradually transform and upgrade to the fields of robots, industrial automation and artificial intelligence.

4) Investment advice: "buy" rating. Cover for the first time, giving a "buy" rating. We estimate that the company's net profit from 2019 to 2021 will be 1.19 pounds 1.48 / 181 million yuan respectively, and the corresponding PE will be 61.7,49.9,40.6 times respectively. With the rapid growth of downstream orders and the improvement of management efficiency, the company's profitability is expected to improve rapidly. In addition, the company laid out the servo system earlier and put it into the market in batches, which has a leading edge in technology, and has gradually transformed and upgraded to the fields of robotics, industrial automation and artificial intelligence. The company is expected to accelerate the process of localization of servo motors and make this field a new profit bright spot of the company.

5) risk hint. Sino-US trade frictions may suppress downstream demand and affect the company's export orders; servo motor demand is lower than expected; exchange rate fluctuations; customer raw material price fluctuations and other risks.