Investment suggestion

We downgraded Anjubao to neutral and lowered the target price by 35% to 10.0 yuan. The reasons are as follows:

The company's revenue in 2016 was 798 million yuan, an increase of 1.74 percent over the same period last year, but revenue from products such as building intercom, smart home systems and parking systems all declined to varying degrees.

Considering that the domestic real estate regulation and control is still strengthening, the revenue growth rate of the company's related products may slow down, putting pressure on the overall income growth.

Due to the continuous increase in investment in mobile Internet projects and urban cloud parking networking projects, the company's net profit fell sharply by 50% to 17.6 million yuan in 2016. Considering that the company will continue to accelerate its transition to the Internet in the next few years, the relevant investment is not expected to be reduced, and the company expense rate is likely to rise further.

We are the biggest difference from the market. The market has high expectations for the company's transformation to the Internet, but from the progress of the company's business, cloud parking and other businesses still need further running-in of the business model, which is difficult to contribute to profits in the short term.

Potential catalysts: (1) the further increase of investment in the transformation of the company leads to a further decline in the scale of profits; (2) the promotion of smart home is accelerated, and the related business income exceeds expectations.

Profit forecast and valuation

It is estimated that in 2018, the company's operating income will be 902max 1.07 billion yuan respectively, an increase of 13.1% and 18.6% respectively over the same period last year, and the vested net profit will be 32.33 million yuan, an increase of 83.7%, 62.0% and 0.10 yuan respectively over the same period of last year. Considering that the company's performance continues to decline and investment in transition to areas such as the Internet is still likely to increase in the next few years, the target price will be lowered by 35% to 10 yuan, which is 4.2% higher than the current share price.

Risk.

(1) there is a significant decrease in housing completion or new construction; (2) the company's transformation to the Internet and the market expansion of cloud parking are not as expected; (3) the sector's systematic valuation pullback.