Main points of investment
2017Q1 achieved operating income of 1.06 billion yuan, an increase of 14.62% over the same period last year. 2016 was the year when the company quickly landed overseas, and most of the company's overseas orders were concentrated in the second half of the year and the end of the year. In the early stage of construction projects, there is generally a rapid outflow of cash flow (prepaid materials and project payments, etc.), but revenue recognition is relatively slow. It is expected that with the progress of the project, the company's revenue will further accelerate.
The company's 2017Q1 achieved a gross profit margin of 25.21%, an increase of 3.62% over the same period last year. We expect the company's gross profit margin to increase significantly compared with the same period last year, mainly due to the fact that overseas businesses with higher gross profit margins account for a larger increase compared with the same period last year, and the company's comprehensive gross profit margin is expected to remain high in the future. 2017Q1 achieved a net profit of 9.36%, an increase of 1.14% over the same period last year. The increase in net profit margin less than the gross margin is mainly due to the increase in the proportion of expenses during the period.
The company's expense rate during the 2017Q1 period was 11.34%, an increase of 4.89% over the same period last year, mainly due to the increase in management and financial rates. The rapid increase in expenses to some extent reflects that the company's business is in a period of rapid expansion. The rate of sales expenses, management expenses and financial expenses increased by 0.13%, 1.59% and 3.04% respectively compared with the same period last year.
During the reporting period, the company suffered asset impairment losses of 22 million yuan, down 26.67% from the same period last year; asset impairment losses accounted for 2.06% of income, down 1.16% from the same period last year, mainly due to better rebates in the reporting period.
The net operating cash flow of 2017Q1 is 447 million yuan, which is 128 million yuan more than that of the same period last year. From the point of view of the ratio of income to cash, the cash-to-cash ratio has increased significantly, so we believe that the deterioration of cash flow is mainly due to the increase in new projects and large investment in the early stage; the improvement of cash-to-cash ratio is the main reason for the deterioration of cash flow.
From the balance sheet point of view: the company's other accounts receivable, advance, advance payments are at an all-time high. Among them, the substantial increase in other receivables indicates that the future order trend of the company is improving; the substantial increase in advance shows that the company's project has gradually landed, received the advance payment from the owner, and is about to enter the construction stage; the sharp increase in advance payment indicates that the company's project is in an intensive construction period, and revenue will be gradually recognized later. Combining the above three points, we believe that the revenue growth behind the company is likely to accelerate.
Profit forecast and rating: from 2017 to 2019, the company's EPS is expected to be 0.43,0.62,0.82 yuan respectively, and the corresponding PE is 21.7,15.2 and 11.5 times respectively, maintaining the "buy" rating.
Risk tips: macroeconomic recession, overseas market risks, project schedule is not as expected