Investment points Zhongcheng shares: international engineering enterprises controlled by CIC Group. Zhongcheng shares were initiated and established by Zhongcheng Group in 1999 and listed in 2000. At present, the company's main business includes the export of complete sets of equipment and foreign contracted projects, general trade, etc., international project contracting as the core business. The company's controlling shareholder Zhongcheng Group, the actual controller of the CIC Group, has a shareholding ratio of 45.80%.
Belt and Road Initiative's strategy landed, and international engineering enterprises ushered in a golden period of development. In 2016, China's newly signed contracts and completed turnover along the "Belt and Road Initiative" route increased by 36% and 9.7% respectively compared with the same period last year, showing a trend of acceleration. The deficiency of Chinese enterprises in "going out" is gradually made up, and the advantage is becoming more and more obvious. The proportion of overseas business of large-scale central construction enterprises is low, and there is still room for improvement; the overall scale of international engineering enterprises is small and the growth space is huge. With the landing of the "Belt and Road Initiative" strategy, the overseas market share of Chinese engineering enterprises will accelerate their expansion.
"Belt and Road Initiative" strategy + major shareholder support = "small company, big growth". In 2015, the import and export of complete sets of equipment accounted for 88.29% of the revenue, making it the core business; in the future, the dominant position of the international engineering business is expected to continue, and the promotion of the "Belt and Road Initiative" strategy will accelerate the company's development of markets along the route. The actual controller of the company, the CIC Group, is strong. With the strong support of the CIC Group, the international business of Zhongcheng shares ushered in an opportunity period. For Tender Industrial International, the company has broad room for growth and room for profitability improvement.
There are plenty of contracts on hand, accelerating the effectiveness of performance growth. Major contracts signed in 2016 totaled 4.749 billion yuan, an increase of 118.85 percent over the same period last year; the company's current outstanding orders reached 12.371 billion yuan, 10.21 times the 2015 revenue; and new orders are accelerating. Projects with Chinese loans are dominant, with an increase in the number of projects financed by the owners themselves, and projects financed by the owners take effect quickly, which is expected to accelerate the growth of the company's performance.
The key points for the future: 1) the acceleration of newly signed orders drives the rapid growth of the company's performance, the newly signed orders show signs of acceleration, the existing orders are sufficient, and the performance is expected to accelerate growth; 2) the reform of state-owned enterprises is expected to land, and the reform of the department system is carried out. Employees have sufficient motivation, and the introduction of equity incentive programs in the future is a high probability event.
Earnings forecast and rating: the company's EPS from 2016 to 2018 is expected to be 0.56,0.75,0.90 yuan respectively, and the corresponding PE is 34.8,26.2 and 21.7 times respectively.
Risk hint: the order effective progress is not as expected, the order construction progress is not as expected, and the exchange rate fluctuation risk