Main points of investment:
Regional leading enterprises of highland road and bridge projects. The company is mainly engaged in the construction, maintenance, survey and design, test and inspection of road and bridge projects, as well as the production and sales of engineering facilities such as steel corrugated culverts, in which road and bridge construction and maintenance are the main source of income of the company, accounting for more than 90% over the years. The company's business is mainly concentrated in Qinghai Province, with a market share of more than 5%. It is a road and bridge engineering construction enterprise with the most complete construction qualification and the highest qualification grade in Qinghai Province, and has accumulated rich construction experience in high altitude, high cold and permafrost areas. After the issue, Chairman Jin Shengguang and other three people directly and indirectly hold 46.89% of the shares of the post-listed company (calculated by issuing 99.7 million shares), which are the actual controllers of the company.
Benefiting from steady growth and the "large-scale development of the western region", the market still has great potential to be tapped. Highways play a leading role in China's inland transportation, and the mileage of highways has increased from 3.3452 million km in 2005 to 4.57 million km in 2015. as an important part of infrastructure investment, the government has intensified its steady growth under the pressure of declining economy. the growth rate of highway investment will remain stable. The western region has benefited from the "western development" strategy, and considerable progress has been made in transportation infrastructure construction, but the backward situation has not fundamentally changed. by the end of 2014, the average highway density of the 12 western provinces and autonomous regions is only 56.40% of that of the whole country. among them, the average highway density of Xinjiang, Tibet, Qinghai and Inner Mongolia is less than 35% of that of the whole country, which has great potential to tap the market.
Income growth is relatively stable and short-term results are likely to be under pressure. From 2013 to 2015, the company's operating income was 1.883 billion yuan, 2.571 billion yuan and 2.408 billion yuan respectively, with year-on-year growth rates of 56.96%, 36.54% and-6.36% respectively, and the attributable net profit was 82.0445 million yuan, 117.0659 million yuan and 8839.21 yuan respectively, with year-on-year growth rates of 49.69%, 42.69% and-24.94% respectively. The contract volume of the company from 2013 to 2015 was 3.591 billion yuan, 1.545 billion yuan and 1.426 billion yuan respectively, which decreased year by year mainly due to the investment and contract cycle of key transport infrastructure projects in the "12th five-year Plan". By the end of 2015, the number of contracts held by the company was 2.189 billion yuan, and the cumulative amount of newly signed contracts from January to May 2016 was 681 million yuan. Considering that the project construction period is 2-3 years, the company's short-term performance may be under pressure.
Fund-raising will be used to purchase equipment and supplement working capital, and listing will accelerate expansion outside the province. The funds raised by the company are mainly used to purchase construction machinery and equipment and supplement the operation funds of road and bridge construction business, so as to effectively improve the level of mechanization and automation of the company, and further enhance the business undertaking capacity inside and outside the province. It is estimated that the annual depreciation will be increased by 13.3 million yuan after the full implementation of the project; at the same time, the company's asset-liability ratio tends to be reasonable, and the company's efficiency and sustainable profitability can also be improved.
The reasonable value range is 8.61 yuan to 9.68 yuan. We estimate that the EPS of the company in 16-17 years will be 0.22 yuan and 0.25 yuan respectively. According to the rules of issuing new shares, the issuing price of the company will be 5.03 yuan ((net financing 450 million yuan + issue fee 51 million yuan) / issuance quantity), corresponding to about 23.37 times the PE of 16 years. The company is a new stock with a small market capitalization. With reference to the valuation of listed companies in the same industry, the company is given a 16-year dynamic price-to-earnings ratio of 40-45 times, and the corresponding reasonable price range is 8.61 yuan to 9.68 yuan. Considering that the company's current business is mainly concentrated in Qinghai Province and has rich experience in plateau highway construction, the widening of financing channels after listing is conducive to the expansion of highway engineering market and PPP business in western provinces, and is beneficial to the long-term development of enterprises.
Risk hint. The risk of market development is not as expected and the risk of performance decline.