Main points of investment:
Maintain the overweight rating. In the first three quarters of 2014, the company realized operating income and net profit of 20, 90 million, up 13.8%,-21.9%, and 18.8%,-14.1%, respectively. Due to the rapid increase in costs, the performance was lower than our forecast of 0.12 yuan. Maintain the forecast of 2014-16 EPS to 0.51,0.49 and 0.52 yuan, and maintain the overweight rating. The increase in labor costs is a drag on the company's performance. We expect revenue growth to come mainly from car sales and passenger revenue growth, but labor costs are faster than revenue growth, dragging down the performance of the main business. In April 2014, the company established Yingtan bus Company, and the increase in labor costs led to a 12.264 million increase in management expenses in the third quarter compared with the same period last year (+ 23.6%).
The pace of mergers and acquisitions or extension to other industries may be accelerated. As of Sept. 30, the company had $530 million in cash and expects net cash flow from operating activities to be close to 400 million in 2014. In September 2014, the company announced to apply for a 500 million loan, according to the company's development strategy-"relying on the advantages of passenger transport business, building a large tourism industry with tourism business as the core, and speeding up the development of the logistics industry", and the company's existing logistics assets, we believe that the company will speed up the merger and acquisition of existing passenger transport business (continuous acquisition strategy for the past 13 years), and the pace of entering tourism or other industries may be accelerated. The company has abundant cash flow, and the recovery and use of capital in the future will largely determine the long-term prospects of the company.
The commissioning of the new station and the revitalization of the assets of the old station will help to further improve cash flow. The comprehensive passenger transport hubs of Nanchang West, Nanchang and Fuzhou are expected to be put into production in 2015. After the new passenger transport hub is put into production, the existing Fuzhou long-distance station, Xufang and Qingshan passenger station in Nanchang area can be gradually revitalized in the next three years. If the land is collected and stored or other forms of commercial development are adopted, it will contribute to the growth of the company's profits.
Risk hint: the decline in passenger volume and the higher-than-expected diversion of high-speed rail, the approval risk of future capital operation.
