Leading enterprises of insulators for high voltage transmission lines

The company is the earliest enterprise engaged in the production and manufacture of line insulators in China, and has an absolute advantage in the large tonnage and high voltage market. It has won many honorary titles such as the special prize and the first prize of the National Science and Technology Progress Award issued by the State Council. The company ranks first in the industry in terms of production capacity and output of porcelain insulators for transmission lines, accounting for about 30%. In the previous bids of the national network, the number and amount of porcelain insulators ranked first in the industry, and the proportion of winning bids basically exceeded 30%. The company launched electrified railway products this year and is expected to complete the CRCC certification in October, laying a solid foundation for the company to enter the electrified railway. The company's first-half net profit increased 4.3 times compared with the same period last year. Castrol Fund, Central Huijin Fund, Boshi Fund and so on are all company investors.

Revenue / net profit skyrocketed in the first half of the year, and profitability increased significantly in the first half of the year. The company's revenue was 375 million yuan, an increase of 106.28% over the same period last year, and its mother's net profit was 44 million yuan, an increase of 426.88% over the same period last year. In terms of products, the income of suspension insulators and power station electric porcelain has increased significantly, and in terms of market development, products have entered nearly 50 countries and regions, such as Pakistan, Iran and so on. In terms of profitability, the company's gross profit margin increased by nearly 10 percentage points compared with the same period last year due to the decline in the prices of raw materials such as steel and gas. In the first half of the year, operating activities generated cash flow of 47.69 million yuan, an increase of 6.67% over the same period last year.

Comparable to the analysis of listed companies, the performance growth rate and gross profit margin are in the lead, but the valuation is relatively low. compared with the listed companies in the industry, the growth rate of revenue and net profit in the first half of the year is much faster than that of other companies, and the gross profit margin and net profit margin are also in the lead of the industry. far above the plate average, but the company's current valuation is low, or even the cloud plate average.

UHV construction ushered in a peak, dividends continued to release, the company's performance flexibility according to the national network planning, "13th five-year Plan" period will invest at least 700 billion yuan in UHV construction. According to past experience, insulators account for about 2% of UHV investment. According to this, the market size of insulators during the 13th five-year Plan period is 14 billion yuan, and the market space is large enough. As the leading company in the insulator subdivision industry, the company's performance is highly flexible.

Controller change, extension transformation is expected to be strengthened

This year, the company's actual controller has changed, the new controller has a number of rare earth reserves, separation, processing and magnetic material production assets, the company's main business structure adjustment is expected to be strengthened in the future.

Equity incentive to further improve profitability

Last year, the company conducted its first restricted equity incentive, granting 4 million restricted shares to 32 management and core technicians at a price of 5.67 yuan per share. the condition is that net profit in 2015, 2016 and 2017 increased by 60%, 70% and 80% compared with 2014. According to the results of the first half of the year, it is a high probability that the unlocking condition will be reached this year.

Profit Forecast and Investment rating

The average price-to-earnings ratio of the cable components of the SW sub-plate where the company is located is 64.81 times. Taking into account the rapid growth of the company's performance and the higher-than-expected UHV construction, we believe that the company's reasonable valuation is 75-80 times PE valuation. According to the 16-year performance EPS forecast, the corresponding reasonable stock price is 35.93-38.32 yuan per share, giving the company an investment rating of "overweight".