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　　 Sina tip: This is a research report column, which is only an analyst's personal views and opinions on a stock, not a formal news report. Sina does not guarantee its authenticity and objectivity. All effective information about the stock is subject to the announcement of the Shanghai and Shenzhen Stock Exchanges. Investors are respectfully advised to pay attention to the risks.

Zhongyuan Securities Xu Minfeng

Key elements of the report: in the process of development, the company gradually shifted its strategic focus from traditional equipment manufacturing to a listed company in the whole industry chain, including EPC, equipment manufacturing, project operation and financing support in the environmental protection industry, focusing on waste incineration. In the future, the company may reduce the burden, gradually reduce the proportion of investment in traditional equipment manufacturing business, and invest more funds in the promising field of waste incineration.

It is expected that the annual performance will achieve stable growth. In the first three quarters of 2012, the operating income and net profit of the company were 628 million yuan and 59 million yuan respectively, up 35.17% and 22.41% year on year. It is estimated that the annual revenue growth of the company will reach 30%, mainly from the operating income of waste projects and government subsidies.

Zhongke GM is the core of the company's future strategy. After the completion of restructuring, the company will hold 90.36% of the shares of China Science General Motors, and the remaining shares cannot be acquired temporarily due to the pledge. With years of operation in the field of waste incineration, Zhongke GM has rich project experience and customer base. The company plans to take the environmental protection industry as the strategic focus of future development, integrate the merged Zhongke GM with the existing business departments of the company, and launch the waste incineration power generation project.

The position of conveyor business will gradually decline. The company's conveyor business income in the first half of 2012 was 217 million yuan, up 8.70% year on year; The gross margin of conveyor business was 26.86%, down 3.30 percentage points year on year. It is expected that the company will invest more capital and energy into the environmental protection industry after positioning its development focus on the environmental protection industry, and the industrial attribute will change from the traditional machinery manufacturing industry to the environmental protection industry chain.

Earnings forecast and company valuation: It is estimated that the company's earnings per share for 12 and 13 years will be 0.39 yuan and 0.88 yuan respectively. Based on the closing price of 17.00 yuan on December 11, the corresponding P/E ratio of the company for 12 and 13 years will be 43.59 times and 19.32 times respectively, maintaining the rating of "increase in holdings".

Risk warning: uncertainty of the progress of new projects; The actual availability of government subsidy policies and subsidies; Actual waste treatment capacity of operating waste projects; There are certain environmental risks.

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