Main points of investment
Event: the company released its 2016 annual report, with an operating income of 1.4 billion yuan in 2016, an increase of 7.0% over the same period last year, and a net profit of 110 million yuan, an increase of 3.1% over the same period last year.
China's leading comprehensive energy technology and service provider. At present, the company's main business is mainly divided into two categories: products and services, including electrical control equipment and power cables. At the same time, the company actively distributes energy saving and electricity consumption services with a high gross profit margin, accounting for 28.2% of the total revenue in 2016. With the promotion of the company's strategy of "building a comprehensive energy technology and service provider", it is expected that the proportion of the service industry will further increase in the future, driving the growth of the company's overall gross profit margin.
Equipment business products are comprehensive, stable performance. At present, the company's main business is equipment products, which are rich in product structure, including power grid security and control products, motor control and energy-saving products, power supply control and automation products and so on. The company's products have a high market share and good brand effect, with a leading market position in the same industry. 2016 of the revenue of electrical control equipment and power cables accounts for 71.8%.
Change electricity into opportunity to generate power consumption service industry. Since the release of Power Reform document No. 9 in March 2015, the curtain of reform with Guangdong as the vanguard has been opened. relying on the advantage of geographical location, the company has carried out online and offline layout, and set up a series of power service companies. mainly engaged in power operation and maintenance, engineering construction services, electricity sales business. In 2016, Zhiguang electricity service achieved a business income of 172 million yuan. With the promotion of power reform and the implementation of specific policies on the energy Internet, the company's electricity services will develop into an important main business, and the development space is expected.
With the layout of energy-saving services in the form of joint ventures, the scale of business is growing rapidly. In 2010, the company established a subsidiary Zhiguang energy-saving service to carry out comprehensive energy-saving business. In 2015, in-depth cooperation with Southern Power Grid on comprehensive energy, jointly initiated the establishment of Nandian Energy Comprehensive Utilization Company, and established Shanxi Zhiguang Qingyuan Energy Saving Technology as a joint venture with Zhongqingyuan Environmental Protection and Energy Saving. Zhiguang achieved an operating income of 220 million yuan in energy conservation in 2016, with a compound growth rate of 98.8% from 2011 to 2016.
Profit forecast and investment advice. We estimate that the EPS of the company from 2017 to 2019 is 0.38,0.44 and 0.53 yuan respectively, and the corresponding PE is 46 times, 39 times and 33 times respectively. Under the background of deepening the reform of the electric power system, developing the energy Internet and promoting energy saving and environmental protection production capacity, the company continues to make efforts in the field of energy saving services and environmental protection services while ramming the business of traditional electrical equipment. in the future, it is expected to become a leading large-scale comprehensive energy technology and service supplier in China. Cover for the first time, give 50 times valuation, corresponding to the target price of 19 yuan, give "overweight" rating.
Risk hints: power grid investment construction and power reform are not as expected, power consumption services are not as expected, and the performance of M & An enterprises is not as good as promised.