Main points of investment
Meizhi shares: well-known architectural decoration enterprises. Meizhi Co., Ltd. is a private enterprise specializing in architectural decoration engineering design and construction, providing cross-domain comprehensive design and construction services for customers of large enterprises and institutions, especially in the public building decoration market. In 2016, the company achieved an income of 950 million yuan and a net profit of 52 million yuan, up-10.61% and 11.71% respectively over the same period last year. The controlling shareholder and actual controller of the company is Li Suhua, the chairman of the company.
The scale of the industry market is huge, and the market concentration is low. In 2015, the national architectural decoration industry completed a total output value of 3.4 trillion yuan, an increase of 7 percent over the same period last year, of which the total output value of the public building decoration market was 1.74 trillion yuan, an increase of 5.6 percent. In 2013, the average output value of the top 100 enterprises, as the backbone of the industry, was 1.716 billion yuan, and the CR100 was only 5.94%, slightly lower than that in 2012, with each company accounting for less than 0.7%. The industry as a whole is very scattered, showing the typical characteristics of "big industry, small company".
Leading decoration business, cross-domain + brand and other five major advantages to create competitiveness. The company's business scope covers decoration and decoration, decoration and design of two major businesses, of which decoration income is the main source of income, accounting for more than 97% of total revenue, and the proportion has increased steadily year after year. The company has excellent professional design and construction capabilities, and has undertaken many famous cross-field landmark projects, among which government agencies, cultural and medical representative projects have become the company's "business card" in the public building decoration market. The company has remarkable brand advantages, and has won more than 100 national, provincial and municipal awards such as "China Construction Engineering Luban Award", "National Construction Engineering Decoration Award" and so on. The company has advanced construction methods, a number of national utility model patents and the National Achievement Award of Architectural Science and Technology to shape brand influence.
Profit forecast and valuation: we forecast that the company's net profit from 2017 to 2019 will be 60 million yuan, 70 million yuan and 82 million yuan respectively. Considering the dilution factor of newly issued shares, the corresponding EPS is 0.60,0.69 and 0.81 yuan respectively. Considering the valuation level of comparable listed companies and the future development space of the company, we think that we can give 30-40 times PE in 2017, corresponding to the price range of 18.0-24.0 yuan.
Risk hints: macroeconomic downside risks, industry prosperity downside, newly signed orders are lower than expected
