Main points of investment:
Re-sign the order for BT hydropower project. On March 11, Jiuzhou Electric announced that the company and Nenjiang Dexin Hydropower Development Co., Ltd. signed the "BT General contract Project of Hongshili Hydropower Station Project in Nenjiang County" with a total contract price of 324 million yuan, accounting for 22.72% of the unaudited operating income in 16 years. It is expected that the performance will be significantly thickened in the next two years.
New energy BT general contract business helps to reverse the performance. Up to now, the total scale of the new energy power plant built by the company is close to 350MW, and some of them have been connected to the grid; we estimate that the company's 16-year engineering business income is about 900 million, and the contribution performance is about 100 million, which brings a substantial improvement in performance. According to the wind power engineering contracts signed by the company in the past two years, the current outstanding orders are expected to be about 2 billion, and this time more than 300 million contracts have been signed, laying a strong foundation for the substantial growth of the company's revenue and performance in the next two years.
The performance of Haocheng Electric exceeded expectations. In November 2015 and March 2016, the company acquired a 100% stake in Haocheng Electric at a consideration of 450 million yuan in the form of share issuance and cash acquisition, with a commitment of 37.5 million, 45 million and 51 million in 15-17 years. The company announced that in 16, Haocheng net profit was 48.81 million, exceeding the performance commitment by 8.5%. While thickening the performance, the acquisition of Haocheng enables the company to accumulate core technology, enrich the product structure, open up the channels to enter the national network bidding, and expand the future sales channels of charging piles, killing many birds with one stone.
The prosperity of traditional self-owned business has been improved, and the technical advantage of power module is obvious. The data of the mid-year report in 16 showed that the gross profit margin of the company's traditional transformers and electrical control automation equipment reversed obviously, thanks to the reversal of orders in the company's traditional industries, the gradual increase in capacity utilization and the gradual reduction of losses.
Equity incentive shows the company's confidence in future development. On December 18, 2015, the company awarded restricted shares to 81 incentive targets at a price of 6.62 yuan, a total of 7.676 million shares, with an incentive coverage rate of 8.72%. According to the unlocking conditions, the non-net profit deducted by the company from 2015 to 2017 is not less than 30 million yuan, 100 million yuan, 200 million yuan. This move effectively combines the interests of shareholders, companies and operators, can fully mobilize the enthusiasm of the company's management and employees, and is a strong guarantee for the realization of performance commitments in the future.
Profit forecast and rating. The company's 16-year new energy BT general contract business helped the performance reverse, the merger and acquisition of Haocheng Electric significantly thickened its performance, and announced the layout of the energy storage industry, which is expected to become bigger and stronger, while ensuring the realization of performance commitments through equity incentives. It is estimated that the company's EPS for 16-18 years will be 0.42,0.61,0.89 yuan respectively. According to the average valuation of the industry, the company will be given a "buy" rating of 30 times PE for 17 years, corresponding to the target price of 18.3 yuan.
Risk hint. The progress of EPC engineering business is not as expected, and the extension is not as expected.