UHV is a major source of China West's profits

According to the China Xidian semi-annual report, operating income increased by 9.66% year-on-year, and net profit turned losses. During the reporting period, the company realized operating income of 5.823 billion yuan, an increase of 9.66%; the net profit attributable to shareholders of listed companies was 150 million yuan, an increase of 306 million yuan year-on-year; diluted earnings per share of 0.034 yuan; basically in line with market expectations. There is no dividend scheme in this period. The company expects high growth in the third quarter.

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UHV delivery, comprehensive gross profit margin improvement, net profit losses. During the reporting period, the company’s steady increase in revenues was mainly due to: (1) Stabilization of conventional product prices; (2) Partial delivery of UHV AC and UHV DC projects such as power transmission to the east, two crossings and two channels. The 2013H1 company's net profit turned losses, which was mainly due to the increase in gross profit margin by 6.26 percentage points year-on-year. The increase in gross profit margin came from two aspects: (1) delivery of UHV projects with higher gross margins; (2) gross margin of conventional products was increased UHV contributes most of the profits and the profitability of conventional products remains weak. We expect the delivery of UHV products in 2013 to be worth RMB 4.5 billion to RMB 4.6 billion, including about RMB 2 billion in the first half of the year and a corresponding net profit of RMB 160 million to RMB 200 million. The 2013H1 company's net profit attributable to the parent company was RMB 150 million. We think most of it comes from UHV contribution, and the profitability of conventional products remains weak. The profitability of each subsidiary shows that 550KV products such as Xichang Changfa and Xichang Changkai are still seriously losing money. The low- and medium-voltage equipment of West Electric Group, Xidian Electric, and conventional products such as insulators, surge arresters, and transformers are also at a loss. in.

The gross profit margin of switching improved significantly, and the share of collective mining increased significantly. Switch income was 2.255 billion yuan, an increase of 4.62% year-on-year; gross margin was 23.50%, an increase of 5.71 percentage points year-on-year. The increase in revenue was due to the change in Minnan and the delivery of the project in Haminan. The increase in gross profit margin was due to the decrease in procurement costs, the continued advancement of miniaturized products, and the delivery of UHV projects. The company performed outstandingly in the first three batches of isolation switch coal mining in 2013 and its market share increased from 3.28% in 2012 to 9.74%.

The rapid growth of transformer income, the successful performance of the winning bid. Transformer revenue was RMB 2.20 billion, an increase of 22.63% year-on-year; gross profit margin was 18.36%, an increase of 5.84 percentage points year-on-year. The increase in revenue was due to the delivery of projects in Nuozhadu and Minnan. The increase in gross profit margin was due to the increase in the price of some products, the decrease in the cost of raw materials, and the delivery of UHV projects. In the first three batches of transformers in 2013, the company’s market share increased from 10.45 percent in 2012 to 14.73 percent.

The revenue from power electronics business decreased slightly, and UHV delivery led to an increase in gross profit margin. The company's power electronics business income was 329 million yuan, a year-on-year decrease of 6.57%. The gross profit margin was 26.74%, a year-on-year increase of 11.40 percentage points. The increase in gross profit margin was due to the delivery of Xiluodu and Yuzhadu UHV projects.

During the period, the cost rate was flat, and the cost rates remained stable. The company's period expenses were 1.059 billion yuan, a year-on-year increase of 9.67%, and the period cost rate was 18.18%, which was the same as last year. The rate of change of each expense rate does not exceed 0.5%.

Future prediction. (1) UHV: According to the company's disclosure of major contracts, we expect that U.S. dollars will have a revenue of RMB 0.45-4.6 billion in 2013; taking into account the delivery of the Zhejiang-Fuzhou line in the next year, it is expected that the U.S. About 100 million yuan, a year-on-year increase of about 10%. (2) Distribution equipment: The CSRC has approved the company's non-public issuance of new items to GE. We expect that the company's smart distribution equipment business will grow rapidly from 2014. (3) Gross profit margin: As the gross profit margin of UHV and smart distribution equipment is relatively high, we expect the company's gross profit margin to increase steadily.