Main points of investment
Rich overseas experience, Belt and Road Initiative core enterprise under CIC Group. The company was established in 1999 by China complete equipment Import and Export (Group) Corporation (Zhongcheng Group) and listed in 2000. The main business is the import and export of complete sets of equipment (project contracting), general trade, overseas operations, etc., and the proportion of business income in 2015 is 87%, 8%, 4%, respectively. Zhongcheng Group (with a stake of 45.36%), a major shareholder of the company, was established in 1959 and, before 1993, as the only special executive agency for China's complete sets of foreign aid projects, it exercised government functions internally and uniformly organized and managed the construction of China's foreign aid projects. as the general implementing unit of China's foreign aid projects, it has implemented more than 1400 large and medium-sized complete sets of projects in Asia, Africa, Latin America and other countries and regions, with rich experience in overseas projects. It became a wholly-owned subsidiary of CIC Group in 2009.
The trend of newly signed orders is strong, and there are plenty of orders on hand to ensure continued growth in future performance. The company announced that the newly signed order in 2016 was about 4.745 billion yuan, an increase of 118% over the same period last year. Recently, the signing of the US $230 million hydropower project in Laos has been announced, and the newly signed orders have a strong momentum. The company is currently ordering about 13.7 billion yuan, 11 times its 2015 revenue. With the promotion of Belt and Road Initiative's strategy, the company's order entry into force and execution are expected to maintain a good trend and accelerate the conversion of orders to revenue.
Exchange gains and tax breaks are expected to accelerate performance. The company's revenue in the first three quarters of 2016 was 900 million yuan, an increase of 51 percent over the same period last year, and its mother's net profit was 76 million yuan, down 11.75 percent from the same period last year. The decline was mainly due to a decrease in gross profit margin of 5.47 pct compared with the same period last year. At the end of the third quarter of last year, the company's prepaid accounts totaled 586 million yuan, an increase of 416 percent over the same period last year, and monetary funds decreased by 58.48 percent, all due to the massive purchase of equipment, indicating that the implementation of the project was accelerated, and follow-up revenue is expected to maintain high growth. At the same time, exchange gains and the inclusion of high-tech enterprises (income tax at a 15 per cent preferential tax rate in 2016-2018) are expected to accelerate performance growth.
The State Investment Group has been included in the pilot investment platform, and the national reform has added momentum. CIC attaches great importance to Belt and Road Initiative's strategy and regards international operation as an important way to change its mode of development. As the core enterprise of CIC Group's international business, the company will receive strong support from CIC Group in investment and financing, basic industry plate operation and management experience. In addition, China Investment Group was included in the pilot of the state-owned capital investment platform, while the major shareholder Zhongcheng Group promised to put forward an equity incentive plan from July 1, 2014 to July 1, 2019. The strong expectation of the company's national reform is expected to fully stimulate the momentum and start a new round of high-speed growth with the full support of the group.
Investment suggestion: it is estimated that the company's 2016-2018 net return profit will be RMB 15,000,000, EPS is 0.52 and EPS is 0.72, respectively, and the current share price corresponding to PE is respectively times that of 38-27-21. Taking into account the company's future growth potential, give the company a target price of 25.2 yuan (corresponding to 35 times PE in 2017), buy rating.
Risk hint: the project progress does not reach the expected risk, overseas operation risk.