The 2015 revenue of Yingda Highway (06888 HK) increased 57.9% year over year to 617 million yuan (HK$, same below), and net profit increased 10.3% year over year to 65 million yuan. The performance was slightly lower than expected. APM service revenue increased 59.6% year over year to $536 million. APM equipment revenue increased 53.4% year over year to $81 million.

The number of asphalt pavement repair services increased 25.8% year over year to 3.9 million square meters, but the unit price of maintenance fell 13.6% year over year to 93.4 yuan per square meter. Revenue from the asphalt pavement repair service business increased only 9.2% year over year to 367 million yuan, while gross margin fell 2.9 percentage points year over year to 36.7%. We expect there is still room for a further decline in repair unit prices, and that the company will acquire more traditional asphalt pavement repair service providers to increase revenue growth. Revenue from asphalt pavement equipment increased 48.0% year over year to 81 million yuan, and the unit price of standard asphalt pavement equipment increased 11.2% year over year to 1.46 million yuan. As competition intensifies and market demand weakens, we expect sales of composite asphalt pavement equipment to continue to be sluggish in 2016-2018.

Earnings per share forecasts for 2016 and 2017 were lowered by 20.8% and 19.7% to HK$0.061 and HK$0.068, adding to the earnings forecast of HK$0.080 per share for 2018. The target price was lowered to HK$1.00, equivalent to 16.4/14.9/12.5 times the price-earnings ratio of 2016/2017/2018, and the rating was downgraded to “collection”.