Company Update

What's new

Hiconics announced its draft plan for equity incentive: to grant27.97mn shares, or 2.54% of total share capital, to 423 managers ankey employees at Rmb2.34/sh. As required, recurring net profit in2018/19/20 should grow no less than 10%/20%/35% vs. 2017.

Comments

Earnings requirement comparatively low. The incentive plan involvas many as 423 mangers and key employees to boost morale.

AFV segment to recover in 4Q17. Revenue from AFV segment in1H17 tumbled 71.6% YoY to Rmb65.25mn. In particular, HiconicsPower reported revenue of Rmb36.70mn and loss of Rmb15.42mn;its earnings remained disappointing in 3Q17.

Industrial control segment to maintain high growth.

Steady progress in energy-savings and environmental-protectionbusiness. Revenue from environmental protection business jumped102.6% in 1H17 to Rmb195mn.

Valuation and recommendation

Maintain earnings forecast. Maintain BUY and TP at Rmb6.28,implying 28x 2018e P/E.

Risks

AFV sales volume disappoints; gross margin of powertrain and VFDproducts declines.