Leader of Electronic Energy Meters

The Company is China's largest manufacturer of electronic energy meters. In 2014, it ranked the first in contract wins of smart electronic energy meters and system terminals. Its reported revenue rose by 10.79% yoy to RMB2.206 billion in 2014 while its net profit attributable to shareholders grew by 10.34% to RMB410 million, with earnings per share at RMB1.15. Having produced and sold 8.75 million and 9.47 million pieces of electronic energy meters respectively in 2014, the Company's reported revenue was RMB1.913 billion, which accounted for 86.72% of its total revenue. The value of contracts it won has solidified the Company's leading position in the industry.

Forerunner of Dispersed Photovoltaic System

Since the setting up of Linyang Photovoltaic Technology Limited in March 2014, the Company has already signed strategic alliance agreements with local governments of Panzhihua in Sichuan, Anting in Shanghai, Hefei and Suzhou in Anhui, Taian in Shangdong, Lianyungang in Jiangsu, etc. Its PV power plants have built up a reserve generating capacity of 1.2GW. The Company has paved the way to be a national player by setting up solar energy subsidiaries in various cities such as Nantong, Yangzhou, Qidong, Rugao, Haimen, Zhenjiang, Nanjing in Jiangsu; Hefei, Xiaoxian, Suzhou, Lingbi in Anhui; Togtoh County in Inner Mongolia; Jinan, Feicheng, Taian in Shangdong and Panzhihua in Sichuan.

Valuation

In 20151Q, the reported revenue of the company increased by 30.4% yoy to RMB504 million while its net profit attributable to shareholders rose by 25.1% yoy to RMB80 million. Its leverage ratio (total debt to total asset ratio) was just at 31.3% in 2014, with cash on hand at RMB880 million. Being in a capital intensive industry, its ample liquidity will ensure its development potential. We recommend a BUY rating, with a 12-month target price of RMB39, which is equivalent to a prospective 2016 P/E ratio of 20x. (Closing price as at 3 Aug 2015)

Financials

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