Power equipment and industrial control: 

The ubiquitous power Internet of Things is accelerating, leading to an investment boom. On March 8th, the State Grid Corporation held a meeting to make comprehensive arrangements for the construction of the ubiquitous power Internet of Things, and accelerate the implementation of the "three types, two networks, world-class" strategic plan. The plan is divided into two stages, with the goal of fully completing the construction of the ubiquitous power Internet of Things by 2024. The ubiquitous Internet of Things will enhance the existing business of the power grid in four aspects: holographic perception, ubiquitous connection, open sharing, and integrated innovation, to support the strategic goal of "three types, two networks, world-class". Three types of enterprises are expected to benefit from the investment wave of the ubiquitous power Internet of Things. From the perspective of the pace and scale of benefit, we believe that the first to benefit will be the State Grid-related information and communication industrial units with comprehensive solutions for the ubiquitous power Internet of Things; followed by power secondary equipment enterprises and related software enterprises that have深耕ed in the power informationization-related fields； and again， enterprises related to sensing monitoring and related applications. 

The key recommendation is Guodian NARI (a leading company in secondary equipment + its related group communication and information services business was injected in 2017); it is suggested to pay attention to Minjiang Hydropower (the State Grid's communication and information business is planned to be injected), Jinzhi Technology (secondary equipment + power informationization), Xinlian Electronics (electricity information collection + 230M networking + smart energy cloud platform), Juahua Technology (energy consumption side information collection), Langxin Technology (electricity and gas marketing and collection systems), Henghua Technology (cloud service platform for the power industry), Yuan Guang Software (the State Grid's e-commerce platform is planned to be injected) etc. 

New energy vehicles: 

The installed capacity of power batteries continues to grow at a high rate. According to the data from GGII, in February 2019, the production of new energy vehicles in China was approximately 53,000 units, increasing by 43% year-on-year. Among them, the sales volume of new energy passenger vehicles reached 50,800 units, increasing by 74.4% year-on-year. The installed capacity of power batteries was 2.24 GWh, increasing by 118% year-on-year and decreasing by 55% month-on-month. Among them, CATL's installed capacity was 1.022 GWh, accounting for approximately 45.6%; BYD's installed capacity was 0.584 GWh, accounting for approximately 26.1%; and Guoxuan Gaoke's installed capacity was 0.127 GWh, accounting for approximately 5.7%. From the perspective of chemical systems, the proportion of ternary batteries reached 82%, remaining the main force in the market, while the proportion of lithium iron phosphate batteries was nearly 15% and that of lithium titanate batteries was about 3%. From the perspective of battery forms, the proportion of square batteries was nearly 80%, the proportion of pouch batteries was nearly 11%, and the proportion of cylindrical batteries was nearly 9%. 

Investment advice: 

Under the expectation of subsidy reduction, the sections with less pressure to lower prices and the enterprises with high growth in quarterly sales volume. 1) We highly recommend the leading battery cell manufacturers with high-quality production capacity that have an in-demand market and strong bargaining power, and are participating in global competition, such as CATL. Also, pay attention to Guoxuan Gaoke, Yibu Lixin, and Xinhuaanda. 2) Material manufacturers that can achieve overseas supply can obtain certain price premiums to offset the domestic price reduction pressure. We highly recommend: Dangsheng Technology, Xinzoubang, Pu Tai Lai, Shanshan Co., Enjie Co., Xingyuan Materials, and Sanhua Zhichong, etc. 

New energy power generation: 

Installation rush is imminent, recovery continues. The rush for installation is expected to accelerate: According to the current adjustment model of wind power benchmark electricity prices, if projects approved before 2018 are not started before 2019, the new benchmark electricity price policy will be implemented. That is to say, the domestic wind power benchmark electricity price will officially enter the adjustment cycle in 2019, and the rush for installation is expected to accelerate. Additionally, recently the National Forestry and Grassland Administration has deleted some unreasonable provisions such as the prohibition of occupying forest land in areas with a slope of 25 degrees or above. The southern region is expected to accelerate its recovery. 

The bidding prices have stabilized and started to rise, while the costs of raw materials have decreased. This has led to a turning point in corporate profits: Since September 2018, the bidding prices for 2.0/2.5/3.0MW models have continued to increase month-on-month. As competition in the industry has eased, the bidding prices are expected to further recover. Additionally, since the fourth quarter of 2018, the prices of major raw materials such as steel have significantly declined, and the profitability of wind turbine and component manufacturers is expected to significantly improve. 

Investment advice: 

At present, the wind power industry recovery is quite obvious. Meanwhile, as the subsidy reduction deadline approaches, there will be a rush for installation in 2019. We highly recommend the leading wind turbine company Sinovel Wind Power and the leading wind tower company TianShun Wind Energy. At the same time, we suggest paying close attention to China Sinoherb Technology, Taisheng Wind Energy, Tianren Heavy Industry, Hengrun Co., Jinlei Wind Power, Ruiyue Co., Zhenjiang Co., etc. 

Risk Warning: 

The pace and intensity of the introduction of industry-related policies may be lower than expected; the production and sales of new energy vehicles and the output of wind power and photovoltaic energy are below expectations; the reform of the power grid is insufficient in terms of intensity or has a slow pace, etc. 

(Source: Anxin Securities)