Events:

From January to September 2013, the company achieved a total operating income of 3.414 billion yuan, an increase of 46.1% over the same period last year, and realized a net profit of 263 million yuan belonging to shareholders of listed companies, an increase of 67.5% over the same period last year, basically in line with expectations.

Comments:

The performance grew rapidly, but the growth rate for the whole year was slightly lower than expected. During the reporting period, the company's main business and net profit increased rapidly, and the gross profit margin continued to rise. Thanks to the increase in the proportion of municipal projects and the in-depth promotion of the company's accurate management, the company's comprehensive gross profit margin reached 15.41%, up 1.11 percentage points from the same period last year, and is still expected to maintain a steady rise in the future. However, the company expects full-year net profit growth in 2013 to be in the range of 10-40 per cent, which is lower than we had expected, mainly due to insufficient new orders and high interest charges due to new borrowing.

The completion of additional issuance is conducive to the reduction of signing and interest costs. The company successfully completed the public offering in July, and the funds raised are mainly used for BT project investment, the investment income will soon be reflected, the company's financial strength will also be strengthened through financing, and the interest expenses will also be reduced. In the future, the company will continue to strengthen the mode of organic combination of construction operation and capital management, the ability to receive orders will continue to enhance, and newly signed orders are expected to re-enter the growth channel.

Maintain the investment rating of Buy-B with a target price of 7 yuan. We downgrade the company's profit forecast and expect the company's main income to grow by 20.8%, 12.4% and 28.9% respectively from 2013 to 2015, and net profit growth by 37.4%, 27.9% and 33.1%, respectively. The company has strong competitiveness in the market in Sichuan province, although the orders affected by the change of local government in the first three quarters are lower than expected, once the tender for large-scale projects is re-launched, the company is expected to sign a large order again, and the rapid growth in performance will continue to maintain the investment rating of Buy-B, with a six-month target price of 7 yuan, corresponding to 14 times the dynamic PE in 2013.

Risk Tip: business area concentration risk, BT project buyback risk.