Event: Recently, the company's relevant senior management participated in the strategy meeting we organized. In the short term, the company's air conditioning electric heaters face certain pressure. In the future, new energy vehicles and industrial polysilicon electric heaters will become the main growth points for the company's civil and industrial businesses. The company's air conditioning business faces pressure in the fourth quarter. From January to October 2015, the air conditioning industry produced 90.91 million units, a year-on-year decrease of 9.3%, and sold 94.86 million units, a year-on-year decrease of 6.3%. The decline in domestic sales of air conditioners in the fourth quarter may widen. The destocking of air conditioning channels is expected to continue until the first to second quarters of 2016, causing sustained pressure on the company's air conditioning electric heater business. Weak demand has led to a decrease in procurement prices by downstream air conditioning leaders. It is estimated that the gross profit margin of the company's air conditioning electric heater business will decline by 2-3 percentage points for the full year. We estimate that the air conditioning electric heater business may gradually bottom out in the second quarter of 2016 at the earliest. The new energy vehicle business will continue to grow rapidly. The company is the only manufacturer of air conditioning control system modules in the new energy vehicle market, providing air conditioning control systems for new energy buses, small cars, etc., and serving more than 20 domestic automobile manufacturers including Yutong and King Long. By business segment: 1) For new energy buses, in the first quarter of 2016, the company will supply water circulation air conditioners to Jiulong Company in batches. The company's products account for more than 90% of Jiulong's demand, with an estimated average monthly sales of over 1,000 units, contributing 30 to 40 million yuan in revenue. 3) For the electric vehicle battery electric heating parts business, the company has begun full supply to Lishen Battery Company, accounting for more than one-third of Lishen's demand. Sales will increase rapidly in 2016, possibly achieving double-digit growth. The new energy vehicle segment achieved over 20 million yuan this year and is expected to reach over 50 million yuan in 2016. The company acquired RuiGeTai in 2013. On one hand, it gradually achieved industrial transformation and entered the oil and gas service business. On the other hand, RuiGeTai has high synergy with the company's industrial electric heater business, bringing resources such as qualifications, technology, and customers, promoting the development of the industrial electric heating business. It is expected that although the oil service business will continue to face pressure, orders for the industrial polysilicon heater business will increase. The company basically monopolizes the sales of domestic industrial polysilicon electric heaters. The private placement has been completed, supporting the company's development. In November 2015, the company issued 59.347 million shares at 10.11 yuan per share through a non-public offering, raising 599 million yuan. The issuance was at a premium with no lock-up period, and the funds are used for the company's offshore oil and gas processing project. After the private placement, the company may replace the funds previously invested in oil and gas projects, extend to upstream and downstream industries based on the traditional main business, and focus on developing new energy vehicles, smart small appliances, and smart equipment manufacturing. Earnings forecast and rating. Due to the dilution from the share increase and the possibility that air conditioning electric heater revenue may be lower than expected, we have revised down the company's 2015-2017 earnings per share from 0.12 yuan, 0.19 yuan, and 0.26 yuan to 0.23 yuan, 0.31 yuan, and 0.41 yuan. The corresponding dynamic price-to-earnings ratios are 61 times, 45 times, and 34 times, respectively. The growth of the small appliance business compensates for the decline in the air conditioning business, the new energy vehicle business is gaining momentum, the industrial polysilicon business continues to improve, and the expectations for external acquisitions and transformation are clear. The company's performance growth potential is huge in the next two years. We maintain a "Buy" investment rating. Return to Sohu, see more.
