1. The company is the industry leader of vacuum interrupter, actively arranging energy storage / hydrogen energy business, and the results of transformation have been shown:

The company is the leader in the production of vacuum interrupter and vacuum switchgear in China. In the field of vacuum interrupter for 50 years and injection No.2, the company has first-class modern technical equipment and production line, and all the core parts are self-made. Since the establishment of the company, the production, sales and market share of the vacuum interrupter have been the first in China year after year, the market share has been stable at more than 30%, the sales performance of 2021H1 has reached a new high, it is in the second leading position in the domestic industry, and ranks in the forefront of the world.

The company has a strong shareholder background, the controlling shareholder is Shaanxi Baoguang Group, the controlling shareholder of Baoguang Group is China West Power Group, and China West Power Group belongs to Erxin Central Enterprise China Electric equipment Group Co., Ltd., the strong shareholder background brings a strong boost to the company.

Vacuum interrupter and sealing pole are the company's basic disk business, in addition, it also covers electronic devices, electrical accessories and electronic ceramics. The basic market of the company is stable, and its technical level, market share and profitability are ahead of its peers. At the same time, the company has a new business layout, cutting into energy storage and hydrogen energy business in 2021. At present, the company's energy storage business has made rapid progress, the project revenue, market expansion and project reserves have all exceeded expectations, and the hydrogen energy business has also made great progress. Under the full license of hydrogen energy business, the company's hydrogen energy business is expected to expand rapidly, and the results of the company's transformation have been achieved.

2. The basic market of the company is stable, and its products / technology / market share / profitability are significantly ahead of the industry:

In 2020, the company's vacuum interrupter and sealed pole accounted for more than 73% of the total revenue. Vacuum interrupter is the core component of medium and high voltage power switch, which is mainly equipped for the power industry and has a high degree of dependence on the power industry. At present, the power industry has entered a stage of high-quality development, which urges power grid companies to re-regulate and continue to increase distribution network investment, and the vacuum interrupter industry maintains a steady growth rate. With the acceleration of the construction of new power system in China in 2021, the link role of distribution network in the coordinated development of source network, load and storage is increasing, and the vacuum interrupter is expected to usher in incremental space.

The company's heavy regulation products are not technical, with nearly 100 items of effectiveness and benefits, a variety of products have been included in the National Torch Plan and the national key new product plan. The company continues to increase the intensity of technological R & D projects and speed up the transformation of scientific and technological achievements. in 2020, the company has made effective progress in three national "sticking neck" and technical tasks, and organized 25 new product research and development projects throughout the year. 16 kinds of new product batch test appraisal has been completed, and the key scientific research projects have won 10 honors at all levels of the province and ministry.

The profitability of the company is also strong. In 2020, the gross profit margin of the company's vacuum interrupter business is 22.39%, and the product value is 713 yuan, which are substantially ahead of the industry level. In the environment of strengthening the construction of distribution network in the power industry, most enterprises in the industry gain market share through low-price competition, while companies do not manage their products and technology, and the value of arc interrupter products is stable while maintaining market share. Gross profit margin increased by 2.51 percentage points year-on-year.

3. The company's energy storage business has expanded rapidly, and the second growth curve has opened:

In 2021, the company does not invest in Beijing Zhizhong Energy Internet Research Institute, Anji Qingfeng, Anji Qinghe and Baohua to set up a subsidiary Baoguang Zhizhong, which is a subsidiary with industry energy storage and integrated energy services. The proportion of the company's equity is 45%.

Baoguang Zhizhong inherits the technology accumulation related to energy storage and profit property rights of Tsinghua University in the past decade, as well as the R & D force of power grid energy storage regulation and control technology that continues to support the new demand of the power system, and the core team is the core team of Zhi Zhongyuan's energy storage business for many years; relying on the West Power Group, which has many years of experience in power equipment research and development and manufacturing, the company's energy storage business has inherent advantages.

In 2021, the Central Financial and Economic Commission proposed to build a new power system with new energy as the main body, which pointed out the development direction of the power industry. The new power system has the "double high" characteristics of high proportion of new energy and high proportion of power electronic equipment, as well as the randomness, volatility and intermittence brought by new energy, so there is a huge demand for regulation resources. In 2020, the cumulative installed scale of photovoltaic in China is 253GW, and the cumulative installed scale of wind power is 280 million kilowatts. With the increasing regulation demand of the new power system and the continuous reduction of the proportion of thermal power units, the traditional power system regulation system based on thermal power plants is difficult to meet the needs of the construction of a new power system. Energy storage can provide multi-time-scale regulation capacity support for a high proportion of new energy, which is an important part of the service and construction of a new power system.

The company has ploughed the power industry for a long time, fully understood the power system, and independently developed the core energy storage EMS system suitable for power dispatching. At present, Baoguang Zhizhong team is responsible for the construction and successful operation of four auxiliary FM projects, all of which have good economic benefits, operate a number of new energy storage projects, and will cut into the user side in the future. The company's energy storage auxiliary FM business has strong profitability and sufficient projects on hand. Thanks to the second company's independent energy storage FM technology and project control, the company's energy storage business is expected to expand quickly.

4. With the introduction of mixed modification, the hydrogen energy business sector is expected to accelerate:

In 2021, the national 14-year deficit plan listed hydrogen energy as one of the six future industries, and various localities also issued intensive hydrogen energy support policies for non-industrial planning, and the top-level design of hydrogen energy was gradually improved. Hydrogen energy application scenarios span energy, industry, transportation, rail transit, chemical and other industries, and the green development path of hydrogen energy is gradually clear.

The company has the basis of gas business, and the gas business of its subsidiary precision ceramics has been providing the company with gas for production for many years, and exports the production gas to the enterprises around Baoji City. In 2020, the precision ceramics stripped off the non-gas business and disclosed the mixed reform. After the completion of the mixed reform in 2021, Baoguang Lianyue hydrogen Energy Development Co., Ltd. became the main body of the company and the injection of dihydrogen energy.

Relying on the full license of the hydrogen energy business of the second company, the gas business of the company is expected to accelerate after the completion of the mixed reform.

5. Profit forecast

From 2021 to 2023, we expect the company to achieve operating income of 10.39 yuan 12.14 / 1.428 billion yuan, YOY 15.18% 16.85% / 17.66%, return net profit 0.57 shock 0.74% / 100 million, YOY 22.69% amp 30.88% / 35.44%, EPS0.17/0.22/0.3 yuan, covering for the first time and giving the company a "recommended" rating.

6. risk hints: the global economic boom is not as expected, the sales volume of major customers is not as expected, the bidding for energy storage projects is not as expected, and the implementation of the mixed reform mechanism is not as expected.