Main points of investment:
Real estate recovery, photovoltaic and grid-assisted performance continued to grow, operating cash flow improved. The company achieved revenue of 2.436 billion yuan in 2016, an increase of 33.89%, and a net profit of 94.953 million yuan, an increase of 46.51%. Q1 realized operating income of 561 million yuan in 2017, an increase of 8.38%, and a net profit of 32.269 million yuan, an increase of 31.07%. It is predicted that the net profit from January to June 2017 will be 7002.8-86.1883 million yuan, with an increase of 30%. The sustained high growth in performance is mainly due to 1) the income from the grid connection of photovoltaic power stations; 2) the recovery of real estate sales leads to the recovery of new decoration work. The company's net operating cash flow was-53.249 million yuan, an increase of 34.41% over the same period last year. The improvement in cash flow was due to the recovery of real estate sales and the acceleration of payback.
As a result of the operation reform, the gross profit margin of the decoration business decreased, the three fees were well controlled, and the net profit margin increased. In 2016, the company's comprehensive gross profit margin was 12.21%, with a reduction in 2.09pct. Among them, the gross profit margin of decoration business was affected by the increase in revenue, which decreased by 2.09pct to 12.16% compared with the same period last year. During the period of the company, the expense rate decreased 0.88pct compared with the same period last year, of which the sales expense rate decreased by 0.94% year-on-year 0.28pct, the management expense rate by 2.49% year-on-year, 0.52pct, and the financial expense rate by 0.75% year-on-year by 0.07pct. Good cost control, a 49.5% drop in superimposed operating tax partially offset the increase in revenue, and the company's net interest rate rose 0.34pct to 3.90% year-on-year. The company's asset impairment loss increased by 116% in 2016 compared with the same period last year, mainly due to the failure to pay for some construction contracts according to the project schedule.
With enough orders on hand, "Ruihe Home" opens the Internet home decoration imagination space. Benefiting from the recovery of real estate sales, the company has sufficient orders for decoration and decoration. As of December 31, 2016, the company has signed unfinished orders totaling 3.348 billion yuan, which is about 1.38 times the operating income in 2016, which has a strong support for the 2017 performance. In December 2016, the company officially launched the "Ruihe Home" new home improvement Internet brand, combined with the "VR+BIM+ERP" management concept, to strengthen the development of home improvement through the Internet, and further open up the future development space of the company in the field of Internet home decoration.
Grid-connected generation + won the EPC order of the power station to create the second main business of photovoltaic "construction + operation". The company carried out strategic cooperation with Xinyi Solar in 2015 to invest in photovoltaic power stations and enter into photovoltaic power plant engineering installation and other fields. Anhui Jinzhai Power Station, which was invested by the company, realized grid-connected power generation in 2016, contributing 21.8344 million yuan in investment income. At the same time, the company undertakes the EPC general contract of Guangdong Heyuan photovoltaic power station, with a total contract price of about 240 million yuan, accounting for about 10% of the company's revenue in 2016, which is an important breakthrough in the field of photovoltaic power station EPC construction. It will not only significantly improve the company's future performance, but also help the company to improve its ability to undertake business in this field. The photovoltaic power station "construction + operation" mode actively created by the company will become a new focus for the company to thicken its performance and drive the continuous improvement of profitability.
Profit forecast and valuation. We expect the company's EPS from 2017 to 2018 to be 0.95yuan and 1.28yuan respectively, taking into account 1) sufficient orders-on-hand, obvious recovery of decoration business, 2) "Ruihe Home" expansion of Internet home decoration to promote the company's home improvement business further volume; 3) Photovoltaic power station "construction + operation" has become a new growth point of the company's performance, giving 2017 45 times PE valuation, reasonable value of 42.75 yuan, given the "increased holdings" rating for the first time.
The main risk. Infrastructure investment is not as expected, photovoltaic sector is not as expected, payback risk.