What happened: recently, we conducted a field survey of the company and communicated with senior executives about the company's current situation and future strategic development.
With a large investment in the rail transit industry, the company has ushered in opportunities: the scale of railway fixed assets investment in the 13th five-year Plan will reach more than 3.5 trillion yuan, of which about 3 trillion yuan will be invested in capital construction and 30,000 kilometers of new lines will be built, which is significantly higher than the 12th five-year Plan. The company's business is in the field of rail transit, and the future strategy will focus on the development of urban rail transit business, while the central government encourages private enterprises to invest in construction, which is good for the company's future bidding and brings opportunities for the company's rapid development in the next five years.
With the rapid growth of orders, it is confirmed that the peak period of revenue is approaching: the company's three quarterly reports reveal that the total amount of contracts executed is about 2.06 billion yuan, of which the domestic contract is about 1.05 billion yuan. The company is in an industry with a long delivery cycle, and about a year and a half of products begin to recognize revenue one after another. The number of contracts executed by the company has increased significantly since the second quarter of 2015, from 665 million yuan in the first quarter to 908 million yuan in the second quarter, the largest increase in a single quarter in recent years.
As a result, it can be predicted that the company will enter the peak period of recognized revenue, and there will be a significant increase in operating income for the whole of 2016.
With the completion of M & A, the synergy effect is about to be reflected: the company has completed the merger and acquisition of Baofu in Germany and has the catenary business of RPS, which enables the company to achieve the leap covered by both primary and secondary equipment. Under the background of preference for integrators and comprehensive solution suppliers in the field of rail transit, it is helpful for the company to obtain orders. In addition, the company will continue to restructure the organizational structure of RPS, reduce costs, and realize the complementary effect of the introduction of high-quality foreign products into the Chinese market and the overseas development of domestic high-quality business through RPS.
Profit forecast and investment advice: the company's EPS from 2016 to 2018 is expected to be 0.40,0.39 and 0.45 yuan respectively, corresponding to PE of 55 times, 56 times and 49 times respectively. We are optimistic about the layout of the company in the field of rail transit, and believe that the company can achieve complementary development at home and abroad through RPS, covering for the first time and giving a "buy" rating.
Risk hint: the risk that the progress of rail transit construction may be less than expected, the risk that the labor cost of overseas business can not be reduced, and the risk of exchange rate.