Event: April 22, the company announced on with Foxconn Technology Group signed the "new energy vehicles and automotive electronics R & D and industrialization of strategic cooperation agreement", the two sides in the new energy vehicles and automotive electronics R & D and industrialization of the establishment strategic partnership. In addition, the April 25 evening, the company disclosed in a quarterly EPS0.26 first quarter of 2011 yuan.

    Comments: Foxconn cooperation with related products will help improve the technological level of companies and R & D capabilities, accelerate the process of new energy automotive industry: automotive electronics in China's automotive industry one of the weakest links. While Foxconn is still the main business computer, communications, consumer electronics and other areas of 3C, but since 2005, after the acquisition of Aetna has been successfully involved in electrical and automotive sector already has a strong technical strength. Aetna electrical automotive wiring harness business owners, electronics, appliances and other parts manufacturing, and has been for Ford, Volkswagen, Nissan and other famous international auto giants support.

    In addition, Foxconn Technology's Lithium Division is specialized in lithium battery research and development and production, and the layout of the multinational corporations have global, with Europe, Japan, the United States and many other electric car companies have established R & D cooperation. Thus, cooperation with the Foxconn or to some extent, improve the technical content of JAC products to help enhance the comprehensive competitiveness of the company's products; In addition, the cooperation is also conducive to JAC enhance the field of new energy R & D Powertrain strength, which is also conducive to the company's new energy automotive industry to speed up the process.

    The specific effects of cooperation need to be co-operation model and the determination of the details: from the perspective of this agreement, the cooperation of the company's short-term performance is not affected. In addition, the two sides signed the framework of this agreement, the specific modalities of cooperation and the content has not yet determined. We believe that the existing bilateral cooperation may take a simple "commercial vehicle spare parts factory +" mode, that is, from Foxconn meet their requirements for the JAC to provide the automotive electronics and new energy vehicles, related parts; the two sides may also be set up joint venture jointly developed by the joint venture company related products, and then supply the joint venture company to JAC.

    JAC in the first quarter results are still high growth: in the first quarter the company achieved operating income of 9.474 billion yuan, an increase of 17.25%, achieved 336 million yuan net profit attributable to parent company, an increase of 49.33%. Net profit growth rate is much higher than revenue growth due to sales and management fee rates were significantly reduced year on year, which is the company to achieve scale in the car business after the break the inevitable result. We forecast that car sales this year will exceed 180,000, achieve profitability.

    The future, there may be frequent highlights: In 2011, the company's biggest highlight is the car business to profitability, which has been generally recognized by the market. In addition, the company's export performance is becoming a new growth point, the company exported 14,492 vehicles in the first quarter, an increase of up to 213.61%. Notice the right way last year with the cooperation of the Group and this work is expected to become the new Foxconn also highlight the substantial increase in the company of its own power, and external cooperation, enhance the performance of the company will certainly lay a solid foundation for sustained and rapid growth.

    Investment advice: not to consider the additional impact, we maintain the company's profit forecast, forecast the company to achieve 2011-2013 net profit attributable to parent company were 17.56,21.22,25.44 billion, corresponding to EPS were 1.37,1.64,1.96 yuan. Corresponds to the company's current share price has only 9 times 2011 PE, significantly lower valuation, we maintain their "buy" rating.