This report is read as follows:
Incremental distribution network + Belt and Road Initiative landing acceleration, the company is expected to further open the overseas distribution network market.
Main points of investment:
Maintain the overweight rating. According to the company's annual report, the company achieved operating income of 1 billion yuan, an increase of 36.8% over the same period last year, and the net profit belonging to the parent company was 78 million yuan, an increase of 285% over the same period last year, which was in line with our expectations. Considering that the main business of the company's distribution network was relatively sound, it maintained eps0.61/0.71/0.86 yuan in 2017-19, maintained the target price of 38 yuan, and maintained the overweight rating.
The construction of incremental distribution network is accelerated, and the company's main business is growing rapidly. ① benefits from grid distribution network investment and social incremental distribution network construction. The company's distribution business grows rapidly. Sales in East China are 368 million yuan, an increase of 121% over the same period last year. At the same time, overseas companies in the international market through Dalian Ruiyou also achieved overseas power grid project bidding and distribution products sales, overseas sales of 90 million yuan, an increase of 455% over the same period last year. ② incremental distribution network construction is expected to drive the company's distribution network product sales. Since the NDRC approved 105incremental distribution network projects in December 2016, incremental distribution network construction is gradually accelerating, with a large number of incremental distribution network projects in Jiangsu and Zhejiang in East China, the company is expected to seize the incremental opportunity of the industry to further promote the growth of the main industry.
Belt and Road Initiative's landing is accelerated and is expected to open up the overseas distribution network market. The company wholly acquired Dalian Ruiyou in 2015. Dalian Ruiyou, which is mainly engaged in the export of power equipment, was originally the company's largest foreign trade customer, thus opening up export business channels. Zhongneng Electric announced in June 2016 that the consortium won the bid for Brazilian distribution network project investment and 30-year franchise, with an investment of 493 million yuan and an annual franchise income of 78 million yuan. in the future, the company is expected to copy the joint venture model to speed up the layout of overseas power grid operation projects.
Risk hint: distribution network construction is lower than expected risk; overseas market expansion is lower than expected risk.