Three-way power battery successfully deployed

Investment highlights:

Jiangxi Forster Company's strategic transformation, successfully entered the three power battery field. The company's traditional business is the production and sales of wire and cable products, is the largest domestic cable production and sales. In December 2015, the company completed a wholly-owned acquisition of Jiangxi Foster at a price of 1.2 billion yuan and successfully entered the Sanyuan power battery field. Jiangxi Foster promised that net profit from 2015-2017 will not be less than 75 million, 95 million and 130 million respectively.

Jiangxi foster ternary power battery performance exceeded expectations. Jiangxi Foster was established in 2009 and mainly produces 1,8650 ternary lithium batteries with a daily output of 1 million. The product sales volume ranks first in China. Foster power battery products have been highly recognized by downstream customers. At present, Foster is one of the two core power battery suppliers of Zhongtai and is the only power battery supplier of Jiangling Automobile. In 2015, Foster sold a total of 6,702 power batteries, providing 4,225 units, 929 units, 1,398 units and 150 units to downstream customers Zhongtai, Shaanxi Automobile Tongjia, Ganzhou Hengyi and Shandong Kaima, respectively. Foster's 2015 revenue was 1.076 billion, and its net profit was 114 million, exceeding the performance commitment by 52 %.

Jiangxi foster production line continued to transform and expand production, three-yuan power battery business rapid growth. The company currently has a daily battery capacity of 1.25 million, of which 60 % is used in the power battery field. The company is expanding its production of two three-way power battery lines with a output of 250,000 units, one of which will reach production in July and the other in the first half of 2017. Foster is expected to produce 1.5 million units a day by the end of this year(65 % for power batteries and 35 % for consumer batteries); By the end of 2017, the daily production capacity will reach 1.75 million(80 % for power batteries and 20 % for consumer batteries). Conservatively, Foster's actual shipments of ternary power batteries in 2016-2017 were 1.2 GWh, 2.1 GWh, 3.3 GWh, and were in the lead in the industry.

The company actively opened up the energy Internet section, and the traditional business grew steadily. The company's business involves three major plates, three power batteries, energy Internet and wire and cable. Wires and cables are the traditional business of the company and have a steady growth rate every year. Since 2013, the company has started to deploy energy Internet, acquired Ai Neng Power(with professional Grade A qualifications in the power industry), and Zhongxiang Tenghang(drone). Open up energy Internet design planning, product supply, construction installation, operation and maintenance, energy efficiency management and package services. At present, the company's energy Internet plate has been able to provide stable cash flow and part of the profit contribution to the company.

Investment proposals:

The development of new energy vehicles is a national strategy. Passenger vehicles and logistics vehicles continue to grow at a high rate. Both of these two areas choose three-way power batteries. Therefore, three-way power batteries will continue to benefit. We are optimistic about the layout of the company in the three-way power battery field, with performance and high growth. For the first time, give the company a buying rating.

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