Main points of investment

The company layout construction whole industry chain, the management performance α attribute is prominent, 22H1 newly signed doubles / in hand abundant 1) the company occupies the 2020 year Chinese architecture decoration industry top 100 enterprises second, the main business covers decoration (interior, curtain wall, ancient building, intelligent), housing construction, municipal, design and construction of the whole industry chain, the four major fields all hold A (1) level qualification. In recent years, the company has made a positive transformation, greatly reducing the proportion of housing construction and residential decoration, and effectively stabilizing the fluctuation of the industry. In 2021, the company achieved a net profit of 140 million yuan, ranking first in the plate. In five years, the operating performance of CAGR+21%,2022 H1 is significantly better than that of its counterparts in the decoration plate. The basic market of the company is sound, and the alpha attribute is prominent.

2) the number of new signatures is doubled / abundant on hand, and the "design drive" ensures the ability to obtain orders. The newly signed order for 22H1 is 4.7 billion yuan, an increase of 161% over the same period last year; the current order on hand is 8.5 billion yuan, with sufficient growth momentum. Relying on professional design institutions such as its London-based DC-HD design company, the company strives to create a "design-driven" order model, and cooperates with TJAD in September 2022 to continuously expand the margin of business. The company relies on the advantage of natural design to develop the project general contract business, and the revenue of 2021 / 2022H1 EPC will increase by 278% and 166%, fully demonstrating the company's ability to undertake large orders.

The new and old businesses keep pace with each other, and the three major engines drive the higher-than-expected growth. In addition to maintaining the steady growth of the public construction and decoration EPC business and municipal general contracting business, the company focuses on the renovation of old residential areas, the renovation of historical buildings, and the manufacture of high-end system doors and windows, which is expected to open up the company's growth space and drive the performance to exceed expectations:

1) the transformation of old residential areas: during the 14th five-year Plan period, the market scale of old residential areas throughout the country exceeded 3.5 trillion yuan, with an average annual scale of more than 700 billion yuan, and the potential market scale for the transformation of old residential areas in Shandong Province during the 14th five-year Plan period was about 208.6 billion yuan; at the same time, the excellent payment conditions and high customer credit for the old renovation projects in the district are expected to become the new growth pole of the company's business.

2) Historical style building renovation: the entry threshold of the track is high, and the competition pattern is clear; the company starts with technology, holds scarce first-class qualifications, and has a differentiated competitive advantage, and the profit margin of such projects is close to twice that of traditional construction projects. it is expected to boost the company's business profitability.

3) High-end system doors and windows market: under the neutral forecast, the stock hardcover market of the 14th five-year Plan has reached 3 trillion yuan, with an annual compound growth rate of more than 20%, which is expected to drive the high-end door and window market to continue to rise. The company is a large-scale comprehensive industrial center of curtain walls, doors and windows in East China, and has realized strategic cooperation with well-known domestic enterprises such as Qingdao Port, Haier, Poly, China Resources, Jindi, China Construction, China Railway and so on. At the same time, the company plans to rely on the current optimized fund-raising project (system doors and windows under construction production line) to cut into the high-end doors and windows ToC business field, the market imagination space is huge.

The layout mode of the whole industry chain is unique, and the group development is bigger and stronger. 1) the business layout of the whole construction industry chain is perfect. The company is the only fully qualified enterprise in the industry with architectural design, construction, decoration design, decoration construction and production of new materials, with 27 A (1) qualifications and exclusive advantages in the general contract of new municipal business. With the coordinated development of the whole business chain, the company is expected to become bigger and stronger.

2) actively transform the new municipal government. The company is different from the traditional decoration enterprises, its decoration business is mainly public construction EPC package, which can bring the improvement of the company's profitability and the steady growth of business operation. At the same time, the company promotes new urban construction, new infrastructure, green building materials business, and its growth is prominent.

3) based on Shandong to radiate the whole country. The company starts from Shandong, builds municipal brand projects with the advantages of the province, and expands the country with brand project experience, which is expected to help the company hatch into a national comprehensive construction industry chain enterprise.

Profit forecast and valuation

We estimate that the company's net profit from 2022 to 2024 will be 153 million yuan, 214 million yuan and 290 million yuan, an increase of 9.25%, 40.26% and 35.45% over the same period last year, corresponding to 14.96,10.67,7.88 times of PE respectively. We conservatively estimate that the compound growth rate of performance in 22-24 years will be 38%. Based on the PEG valuation perspective, the company's current corresponding PEG is only 0.40, the valuation level is in the undervalued range, and the value needs to be discovered urgently. It is covered for the first time and given a "buy" rating.

Risk hint

The execution of on-hand orders is not as expected, the development of new business is not as expected, the risk of future assets and credit impairment is higher, and the asset-liability ratio is higher.