Inthe first half of the year, the company, while mainly involved in itsstrategic arrangement, showed a steady improvement in the performance ofits motorcycle battery business: In the first half of 2015, the companyregistered a business revenue of 250 million yuan at a growth rate of1.34% year on year; the net profit belonging to the shareholders of thelisted company amounted to 3.276 million yuan at a growth rate of 17.63%year on year and while the net profit after extraordinary gains andlosses was 2.525 million yuan at a growth rate of 128.2% year on year;the basic EPS was 0.01 yuan; the profit from the first three quarters of2015 is estimated at 3 to 10 million yuan. In the first half of theyear, the company, while mainly involved in its transformationarrangement, showed a steady growth in its motorcycle battery business.In terms of its product structure, the proportion of exports somewhatdecreased while domestic sales showed an increase over the previousyear; at the same time, the continued growth in its nano colloid batterysales reflected the company's strategy of reinforcing its high-endmotorcycle battery business and tapping into the domestic and emergingmarkets.

Thecompany has launched its "three-pronged" initiative and steadily andcompletely implemented its strategic transformation: It is determined toforay into the new energy field in three prongs – the manufacturing ofhigh-end batteries as the "root" or the first prong and new-energyvehicles and clean-electricity vehicles as the "branches" or the othertwo prongs. Its NiCoMn 18650 lithium-ion battery production line with anannual capacity of 100 million units will be put to use early nextyear, and advanced Japanese and South Korean manufacturing equipment andprocesses will be adopted to produce high-end products to meet thedemand for new energy vehicles and energy storage; meanwhile, ShanghaiSongyue will be founded to focus on battery packs and BMSs; themass-market electric vehicle Daile developed in cooperation with TongjiAutomotive Research Institute will be mass-produced next year while itreceived positive comments at Auto Shanghai in April; in the markets ofFujian Province and Europe, it has fully taken advantage of policy andits own brand and channel resources; in terms of clean electricitygeneration, it has possessed the complete capability of micro grid loopoperating through initial acquisitions & mergers and consolidation;Jiangsu FGY has an impressive technological accumulation in energystorage and has the photovoltaic generation EPC capability; FaradElectric is exceptionally strong in smart transmission and distributiontechnology; the Yunxi, Hubei project acquired by the company is beingimplemented and expected to generate electricity successfully by the endof this year; Ningxia Lvshan Electrical, its joint venture in theNingxia region, is applying for an electricity sales license; its microgrid loop has been formed; relevant national policies will bepromulgated. In other words, with its "three-pronged" initiative, thecompany has an immense growth potential in a promising market.

Witha goal of global operations, the company has five business units thatare clearly structured: It has created five business units based on itsoriginal three businesses in order to facilitate internal management andimprove efficiency, while its teams have complete pools of talents.Since its early years it has aimed at the international market byestablishing its presence in more than more than 100 countries; in cleanenergy, it has been focused on the countries along the "Belt and Road"where electricity infrastructure is underdeveloped; in terms of energystorage systems, it has focused on the U.S. and European countries. Itsdifferent business units will fully leverage its international customersto its advantage in a bid to achieve its global strategy andoperations.

Ourinvestment recommendations concerning the company's stock: -A rating,with 34.35 yuan as the 12-month target share price. We expect thecompany's revenues from 2015 to 2017 to be 1.125 million yuan, 3.420million yuan, and 6.170 million yuan respectively, with exceptionalgrowth; therefore we reiterate our buy rating (-A), with a target priceof 34.35 yuan per share in the coming 12 months.

Source: Essence Securities