Key points of investment Zhengping shares: leading enterprises in the construction of Qinghai Road and Bridge Project. The Princess of Zhengping Road and Bridge Construction Co., Ltd. is engaged in the construction, maintenance, survey and design of road and bridge projects, as well as the production and sales of engineering facilities such as steel corrugated culverts. The company achieved an operating income of 2.408 billion yuan in 2015, an increase of-6.36% over the same period last year, and a net profit of 88.3921 million yuan in 2015, an increase of-24.49% over the same period last year. The controlling shareholder of the company is Jin Shengguang, and the actual controls are Jin Shengguang, Jin Shenghui and Li Jianli, whose combined shareholding ratio is 62.46%.
The market scale of the road and bridge industry is large, and it is a three-level competition pattern. In 2015, China's investment in highway construction was 1.65 trillion, an increase of 6.81% over the same period last year. As the policy of steady growth continues to increase, investment in highway construction remains at a high level. The investment in highway construction in Qinghai Province is more than 30 billion yuan, and the investment in highway construction in 2016 is expected to reach 38 billion yuan. Qinghai plans to complete more than 200 billion investment in transportation construction during the 13th five-year Plan period. In 2015, the market share of the top four companies with road and bridge business revenue was 17.78%, while that of the top 10 enterprises was 20.92%.
Road and bridge construction business-based, brand + experience to create competitiveness. The income from road and bridge construction accounts for nearly 95%; the company's business is mainly concentrated in Qinghai Province, and the company's market share in Qinghai Province is constantly increasing; the company has rich experience in road and bridge construction on the Qinghai-Tibet Plateau. Market competitiveness is more prominent in areas with similar geological conditions and similar technology applications. "Zhengping" leading brand influence continues to improve, with the tilt of national policy, highway construction in Qinghai Province ushered in historic development opportunities, benefiting from this, the company's future performance growth is expected.
Profit forecast and valuation: we forecast that the company's net profit for 2016-2018 is 102 million yuan, 123 million yuan and 144 million yuan respectively, and the EPS for 2016-2018 based on the total equity after issuance is 0.26,0.31 and 0.36 yuan respectively. With reference to the valuation level of comparable listed companies, and combined with the future development space of the company, we think that we can give 35-40 times PE in 2016, with a corresponding price range of 9.1 to 10.4 yuan.
Risk tips: macroeconomic downturn, fluctuations in raw material and labor costs, and lower-than-expected project implementation.