Dexin Transport is a road passenger transport company in Xinjiang. It has a track record of operating two-wheel drive road passenger transport and passenger terminals. Taking advantage of the dual background advantages of private enterprises and state-owned enterprises, the company is expected to grow bigger and stronger through mergers and acquisitions. We predict that the company's EPS for 16/17/18 will be 0.39/0.29/0.34 yuan, corresponding to the issue price of 5.81 yuan 14.9/19.7/16.9X PE.
A leader in road passenger transport in Xinjiang, it has the dual attributes of a private enterprise and a state-owned enterprise. The predecessor of Dexin Transportation was the Xinjiang Passenger Transport Department under the Autonomous Region Transportation Department. It was restructured into a private enterprise in 2003, forming a pattern of the largest private shareholder and the second largest state-owned shareholder. Delixi Investment holds 68% of the company's shares before issuance. It is the controlling shareholder of the company. The actual controller is Mr. Hu Chengzhong. Xinjiang SDIC holds 30% of the company's shares before issuance, making it the company's second largest shareholder.
Two-wheel drive performance in road passenger transport and passenger terminal operations. The company is one of the leading road passenger transport companies in Xinjiang, providing domestic and international road passenger transport services and domestic and international bus terminal services. Among them, road passenger transportation is the company's main source of profit, and passenger terminal operation is the fulcrum and carrier of the company's passenger transport business; in 2015, the two businesses achieved a total revenue of 298 million yuan and gross profit of 51 million yuan, accounting for 99% of the company's revenue and 108% of gross profit.
The business situation is better than that of its peers, and it is expected to grow bigger and stronger through mergers and acquisitions after listing. Based on the economic and geographical structure of Xinjiang, road transport will still be the most important mode of transportation in the region. Although affected by high-speed rail diversion and violent incidents, the company's operating income declined; however, thanks to fine management, the company's gross margin did not decrease but increased, and its profitability was better than that of peers. Referring to the merger and acquisition of Chengdu Changyun by Fulin Transportation, Dexin Transportation is expected to use the platform of listed companies to expand and strengthen at low cost during the industry's downturn.
Fundraising project: Prior to this issuance, Dexin Transportation's total share capital was 10,000 shares. This time, it plans to issue 33.34 million shares to raise 165 million yuan. The capital raised by the company is mainly used to upgrade natural gas passenger vehicles and increase capital for the Wucaiwan Secondary Passenger Terminal Project in Zhundong Development Zone.
The first coverage gave a “Highly Recommended - A” rating. We predict that the company's EPS for 16/17/18 will be 0.39/0.29/0.34 yuan, corresponding to the issue price of 5.81 yuan 14.9/19.7/16.9X PE. Currently, all listed road passenger transport companies have a market capitalization of over 3 billion dollars, and for the first time, they are covered by “Highly Recommended - A”.
Risk Warning: High-speed Rail Diversion, Violent and Terrorist Incidents