Smart Grid Industry Profitability Analysis Report for the First Half of 2012

In the first half of 2012, the operating revenue of the industry increased by 6.07% year-on-year, slightly lower than the 6.56% year-on-year increase in the first quarter; the net profit of the industry in the first half of the year increased by -20.18% year-on-year, which was a significant increase from the first quarter -32.64%. The 86 listed companies that we are concerned in have lost one in the first half of 2011 and seven in the first half of this year. The loss of the industry has increased compared to the first half of last year. Compared with the 14 losses in the first quarter of this year, the loss of the industry has improved. .

In the second quarter, the industry's profitability changed from weak to strong. The specific performance is as follows: In the second quarter, the industry gross profit margin and industry ROE increased by 0.29 percentage points and 0.96 percentage points respectively from the first quarter. The increase in profitability in the industry in the second quarter was mainly attributable to the increase in industry profitability in the main equipment and upstream and downstream sub-sectors in the second quarter.

From the standpoint of 11 sub-sectors of smart meters, only four sub-sectors, namely, electric energy meters, upstream and downstream meters, power automation and distribution equipment, and upstream and downstream industries achieved positive growth in revenue and net profit. Among them, the distribution of main equipment and upstream and downstream sub-sectors in the first quarter of this year net profit growth of -3.65%, the second quarter of positive growth of 12.07% year-on-year growth. In fact, there is no shortage of individual companies that have achieved a substantial increase in their income in the individual loss-making sub-sectors. For example, the Institute of Electrical Engineering in special applications/integration/other sub-sectors.

Reasons for the decline in the industry's earnings: 1) Grid investment adjustment structure, slowdown in the transmission of the main transmission network; 2) Severe expansion of transmission equipment capacity, intensified competition, and declining gross margin of the industry; 3) Confirmation of income of individual industries such as UHV, company income Late in the first quarter of this year, it has not achieved a deficit situation.

Investment advice: The smart equipment industry is facing a fierce competition in the primary equipment industry, and the gross profit margin in the latter part of the capacity expansion is extremely dizzy, such as transmission and transformation of main equipment and insulators. The secondary equipment is still in a high-growth stage, such as power automation and distribution electronics. Adopting the bottom-up stock selection strategy, we recommend focusing on high-growth companies with high gross profit margins and high market share. In the next few years, they will continue to enjoy a high degree of boom or a booming economy and a reasonable valuation. Such as Senyuan Electric, Sifang shares and confidence in electrical and so on.