MENSHINE Technology: The layout of three-in-hand is completed for achieving performance breakthrough.

In the first half of the year, the company, while mainly involved in its strategic arrangement, showed a steady improvement in the performance of its motorcycle battery business: In the first half of 2015, the company registered a business revenue of 250 million yuan at a growth rate of 1.34% year on year; the net profit belonging to the shareholders of the listed 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 and losses 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 of 2015 is estimated at 3 to 10 million yuan. In the first half of the year, the company, while mainly involved in its transformation arrangement, showed a steady growth in its motorcycle battery business. In terms of its product structure, the proportion of exports somewhat decreased while domestic sales showed an increase over the previous year; at the same time, the continued growth in its nano colloid battery sales reflected the company’s strategy of reinforcing its high-end motorcycle battery business and tapping into the domestic and emerging markets.

The company has launched its “three-pronged” initiative and steadily and completely implemented its strategic transformation: It is determined to foray into the new energy field in three prongs – the manufacturing of high-end batteries as the “root” or the first prong and new-energy vehicles and clean-electricity vehicles as the “branches” or the other two prongs. Its NiCoMn 18650 lithium-ion battery production line with an annual capacity of 100 million units will be put to use early next year, and advanced Japanese and South Korean manufacturing equipment and processes will be adopted to produce high-end products to meet the demand for new energy vehicles and energy storage; meanwhile, Shanghai Songyue will be founded to focus on battery packs and BMSs; the mass-market electric vehicle Daile developed in cooperation with Tongji Automotive Research Institute will be mass-produced next year while it received positive comments at Auto Shanghai in April; in the markets of Fujian Province and Europe, it has fully taken advantage of policy and its own brand and channel resources; in terms of clean electricity generation, it has possessed the complete capability of micro grid loop operating through initial acquisitions & mergers and consolidation; Jiangsu FGY has an impressive technological accumulation in energy storage and has the photovoltaic generation EPC capability; Farad Electric is exceptionally strong in smart transmission and distribution technology; the Yunxi, Hubei project acquired by the company is being implemented and expected to generate electricity successfully by the end of this year; Ningxia Lvshan Electrical, its joint venture in the Ningxia region, is applying for an electricity sales license; its micro grid loop has been formed; relevant national policies will be promulgated. In other words, with its “three-pronged” initiative, the company has an immense growth potential in a promising market.

With a goal of global operations, the company has five business units that are clearly structured: It has created five business units based on its original three businesses in order to facilitate internal management and improve efficiency, while its teams have complete pools of talents. Since its early years it has aimed at the international market by establishing its presence in more than more than 100 countries; in clean energy, it has been focused on the countries along the “Belt and Road” where electricity infrastructure is underdeveloped; in terms of energy storage systems, it has focused on the U.S. and European countries. Its different business units will fully leverage its international customers to its advantage in a bid to achieve its global strategy and operations.

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

Source: Essence Securities