Main points of investment
Ducai shares is a high-growth enterprise in the whole construction industry chain, the company started with decoration, the basic market of public decoration and decoration is sound, and the performance of the three new businesses is higher than expected.
First, how to treat the alpha attribute of Decai shares relative to the traditional construction plate?
1) qualification advantage: the company has the layout of the whole industry chain, and is the only fully qualified company in the industry with architectural design + construction, decoration design + construction and new material production. As of 2022H1, a total of 27 Class A (Class I) qualifications covering the whole construction industry chain have been obtained. The layout of the whole industry chain and complete qualifications will help the company to transform the EPC general contracting model and develop new urban construction, new infrastructure and other business areas, and enhance the company's ability and opportunities to obtain orders.
2) Business advantages: less affected by real estate, the company's cornerstone business is mainly public construction, the main customers include government agencies, public facilities development enterprises, etc., relatively less affected by real estate. From 2017 to 2021, the company's revenue increased from 2.2 billion yuan to 5.04 billion yuan, CAGR+23.0%; net profit increased from 65 million yuan to 140 million yuan, and CAGR reached + 21.1%. The alpha attribute of the company is prominent, and the certainty of performance growth is strong.
3) growth advantages: the renovation of old residential areas, the renovation of historical buildings, and the manufacture of high-end system doors and windows have a broad market space for the business of new engines, which is expected to open up new profit growth space for the company, with high performance and strong certainty.
Second, what do you think of the certainty of the company's future performance?
1) order angle: in terms of stock, as of 22H1, the company's on-hand orders totaled 8.494 billion yuan, and the order guarantee multiple was about 1.4. In terms of increment, as of 22Q3, the company's newly signed contracts totaled 7.77 billion yuan, a substantial increase of 70 percent over the same period last year. The company has abundant orders on hand, the newly signed orders maintain a high growth rate, and the future performance is fully guaranteed, which effectively ensures the high certainty of performance growth.
2) qualification + new business development point of view: from the perspective of the newly signed order structure, the cumulative new signing of 22Q1-3 housing construction / municipal projects has increased by 297% and 266%, and the ability to accept large orders continues to stand out. From the perspective of the new business, the new business orders for the renovation of 22Q1-3 old residential areas, historic buildings and municipal infrastructure reached 6.13 / 1.76 billion yuan respectively, an increase of 30% over the same period last year, an increase of 30% over the same period last year. The cumulative increase of the three types of business was 195% over the same period last year, and the proportion increased to 38%, a substantial increase of 16 percentage points. The company takes public building + municipal business as the cornerstone of business development, the overall operating safety factor is high, the momentum of new business is strong, and the future growth momentum is abundant. With the high increase in orders, the company's performance growth has strong certainty.
Third, what do you think of the company's future growth?
1) basic business orders grew steadily, and EPC general contracting mode was used to undertake a number of large orders and improve profit margins. 22Q1-3, the year-on-year growth rate of newly signed orders for housing construction / municipal projects is more than 180% and 100% respectively, and the project undertaking has a strong momentum; at the same time, the transformation of EPC general contracting mode has effectively promoted the improvement of profit margins.
In 2021, the company's EPC project revenue increased by 278% compared with the same period last year. EPC project revenue of the company 2022 H1 increased by + 166% compared with the same period last year.
2) the three new engine businesses drive high performance growth. The potential market scale of the transformation of the old residential area in Shandong Province during the 14th five-year Plan period is more than 200 billion yuan. at the same time, the old renovation project of the community has excellent payback conditions and high customer credit, which is expected to become a new growth pole of the company's business; the company holds the first-class qualification of the rare ancient building project. the competition pattern of the track is high-quality, we analyze that the profit margin of the project is far higher than that of the traditional construction projects, which is expected to improve the company's business profitability. Relying on the stock room fine decoration market, the high-end door and window market is expected to continue to rise; the company's high-performance system door and window manufacturing production line will be put into production by the end of 2023, which is expected to bring an average annual revenue increase of 355 million yuan for the company.
Fourth, how do we think about the valuation of Decai shares?
1) judging from the current valuation, the company's current valuation is more than 30% undervalued compared with the average valuation of the sector over the past two years, and taking into account the company's operational stability, high future business growth and high performance certainty, we believe that the company should be given a certain valuation premium from the perspective of growth, so the company's value is currently seriously undervalued.
2) from the perspective of reasonable valuation, the company has a strong certainty of high business growth in the future. We conservatively estimate that the compound growth rate of performance in 22-24 years is 38%. From the perspective of PEG, the company will be given 35 times PE, and the reasonable market capitalization is expected to be 5.3 billion yuan in 22 years.
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 16.03,11.43,8.44 times of PE respectively. We conservatively estimate that the compound growth rate of performance in 22-24 years is 38%. Based on the PEG valuation perspective, the company's current corresponding PEG is only 0.42, the valuation level is in the undervalued range, the value needs to be found urgently, and maintain the "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.