Main viewpoints

1. According to the company's quarterly report for 2017, financial subsidies led to a substantial increase in profits compared with the same period last year: revenue of 1.166 billion, an increase of 7.08% over the same period last year, and a net profit of 436 million, an increase of 132.77% over the same period last year, deducting 215 million of non-net profit, an increase of 23.80% over the same period last year and basic earnings per share of 0.19 yuan.

Financial subsidies lead to a substantial increase in profits compared with the same period last year.

On January 19th, the company received 278 million yuan in financial support from the Jiangxi Provincial Department of Finance, compared with 120000 yuan in the same period last year, promoting a big increase in the company's profits compared with the same period last year.

two。 Highway toll revenue decreased slightly compared with the same period last year, and the main growth rate of diversified business contribution was 7.09% during the reporting period, the company's revenue increased by 7.09%, costs increased by 6.1%, and gross profit margin rose from 44.89% to 45.39%.

1) the income of highway tolls decreased slightly. From January to March, toll revenue fell 0.51 per cent year-on-year to 809 million yuan, accounting for 69 per cent of the income ratio.

2) the main growth rate of diversified business contribution. In addition to toll income, revenue from diversified businesses (including oil products sales, engineering business, etc.) reached 356 million yuan, an increase of 29.5% over the same period last year. Our analysis shows that during the reporting period, the average selling price of oil products increased significantly compared with the same period last year, or promoted the growth of oil products sales revenue.

310 million yuan to increase capital subsidiaries, firmly promote the transformation and upgrading of the company!

The company announced that the holding subsidiary Shanghai Jiarong Investment Management Co., Ltd. will increase its capital by 1 billion yuan (according to the progress of the investment project, the funds will be allocated in batches). After the increase, the registered capital will increase from 80 million yuan to 1.08 billion yuan, and the proportion of the company's contribution will increase to 97.22%. Jiangxi Changtai Expressway holds the remaining 2.78% equity.

The purpose of capital increase: to promote the transformation and upgrading of the company's business structure, expand new business areas, and cultivate new profit growth points.

Scope of investment: it is planned to focus on financial industry, energy conservation and environmental protection, cultural media, tourism, strategic emerging industries and other projects.

Investment methods: including but not limited to equity investment, M & A funds, asset management, direct investment and other ways to carry out business.

Jiarong made a profit of-441300 yuan in 2016 and 714300 yuan in revenue and 1400 yuan in the first quarter of 2017. In the future, the company will build it into a diversified development strategy investment platform to provide power source and profit support for the company's medium-and long-term development.

We believe that this capital increase reflects the company's determination to promote strategic transformation.

4. Undervalued, capital expenditure is coming to an end, multiple assets contribute strong support and future transformation foundation 1) the company holds financial assets of 2.531 billion yuan: the company holds shares of Guosheng Financial Holdings (5.52%), Xiangyou Technology (4.26%) and Cinda Real Estate (6.58%). The market price is 2.096 billion (2017-4-24).

In addition, the company has become the largest shareholder of Hengbang Insurance with 437 million yuan (20% equity).

2) rich land reserve: the company owns 500mu of land in Lushan Xihai Scenic spot and 3000 mu of planned land in Tonggu County Hot Spring Town. According to the conservative estimate of 3000 yuan per square meter, according to the planned area, the potential value after completing the formalities is about 7 billion yuan.

The company's land reserve has rich tourism value: Tonggu natural oxygen bar + hot spring resources, and is a red tourism area; the West Sea of Lushan Mountain is close to Lushan Scenic area, which is an eco-tourism area; land projects or reserves for the company's future development of pension and tourism assets.

Financial and real estate projects have a total potential value of 9.5 billion, and the company currently has a market capitalization of 12.1 billion, making a strong contribution.

3) the company's future capital expenditure is coming to an end. The reconstruction and expansion of Changjiu Expressway will be completed and opened to traffic in 2018, which may be the last large-scale project in the next few years. The government's policy of extending the toll life of 14 years and 9 months after the renovation and expansion of Changzhang Expressway is also of reference significance to Changjiu after it is completed and opened to traffic.

5. Investment advice: maintain a "push" rating

1) it is estimated that the EPS of the company in 2017-19 is 0.36,0.39 and 0.46 yuan respectively, and the corresponding PE is 14.4,13.5 and 11.2 times respectively.

2) the highway industry average PB1.7 times, PE17 times, the company is the only broken net stock (0.86x PB), in view of the undervaluation of the company, capital expenditure gradually coming to an end, strong support of multiple assets contribution and the basis of future transformation, increasing capital subsidiaries reflects the transformation determination. Maintain the "push" rating.

6. Risk Tips:

The economic recovery is not as expected, and the progress of land development projects is not as expected.