Main points of investment

Different point of view: Chutian Expressway's acquisition of Miki Intelligence is a model of extension mergers and acquisitions. We believe that Miki Intelligence has good product design and supply chain management capabilities, and has great potential, combined with low-cost financial support of Chutian Expressway. At the same time, the current scale is relatively small, is expected to maintain an average annual growth rate of more than 50%, significantly exceeding the performance commitment.

The forerunner of national reform, firm transformation to seek the future: the company's traditional main business is highway tolling, which is a non-competitive industry. With the help of the acquisition of Miki Intelligence, the company has successfully opened up the second main business and successfully implemented the employee stock ownership plan. The participation of the chairman and other senior executives has further improved the employee incentive mechanism. As the only trading platform in Hubei, the company is a key company of Hubei State Reform. The assessment content of the company includes the requirements of market value, taking into account the limited growth of the traditional main business and the limitation of highway tolls. the pressure of the company's transformation is greater, we believe that the company has further extension expectations.

Perfect match, Miki Intelligent performance is expected to exceed expectations: Miki Intelligent was founded in 2005, is the first batch of professional mobile phones, tablets and other electronic products ODM manufacturers, deep technology accumulation, early because of their own cash flow and the company's business strategy is conservative, mainly do overseas markets, resulting in slow development, the current annual income scale is only 1 billion yuan, corresponding shipments are only a few million Considering that the global average annual shipments of 1.5 billion smartphones and nearly 300 million ODM manufacturers account for a very low proportion, there is a lot of room for growth. In recent years, with the gradual standardization of the domestic market, after the acquisition of Chutian Expressway, we can give it low-cost financial support, and the company will strengthen the development of the domestic market, relying on major customers to create boutique models, and is expected to achieve explosive growth in the domestic market. At the same time, combined with the company's layout in overseas markets and Internet of things, coupled with a good incentive mechanism, Miki's intelligent performance is expected to continue to exceed expectations.

The loss-making line is gradually turning around, and the stable growth of the main business can be expected: at present, the company mainly has three highways, Hanyi, Dasui and Huangxian, which is the company's main source of income and profit, accounting for more than 90%. Due to the influence of broken roads and other factors, Dasui and Yellow Line are still in the loss stage, with an average annual loss of about 1.8-200 million yuan. The upstream and downstream lines of the Dasui and Yellow Line sections are gradually under construction, and the two loss-making lines are expected to reverse losses of more than 60 million yuan a year. At the same time, with the steady growth of about 5 percent a year in the Hanyi section, the company's traditional business is expected to maintain an average annual growth rate of more than 15 percent.

Investment suggestion: the traditional main business has an average annual growth rate of more than 15%, and the performance of the acquisition of Miki Intelligence is expected to continue to exceed expectations. We expect the company's annual net profit in 2016-17-18 to be 3.91 million yuan, with a growth rate of-9%, 53%, 31%, 0.27, 0.41, 0.54 yuan, respectively, and the current stock price corresponds to 21.9, 14.3, 10.9X in 2016-17-18, according to the distribution valuation method. Give the highway section 20 times valuation in 2017, Miki Intelligence 40 times valuation in 2017, corresponding to the target price of 8.67 yuan, further taking into account potential extension expectations, given a "buy" rating.

Risk hint: the traditional main business loss line reversing loss range is low expected; Miki intelligent customer expansion progress is low expected.