Event description

Chengdu Luqiao released its mid-2015 report, with operating income of 523 million yuan, down 34.33% from the same period last year, gross profit 13.64%, 1.95% lower than the same period last year, and net profit attributable to 11 million yuan, down 66.23% from the same period last year. EPS0.015 yuan Based on this, it is calculated that the company's operating income in the second quarter was 336 million yuan, down 21.35% from the same period last year, the gross profit was 13.89%, 1.78% less than the same period last year, and the attributable net profit was 4 million yuan, down 82.44% from the same period last year.

Event comment

Project start decreased, revenue and gross profit margin dropped: in recent years, major national infrastructure investment was mainly concentrated in railways, rail transit and other projects, and investment in highway and traditional municipal construction projects declined, resulting in a continuous decline in the company's order income. Under the large superimposed funding gap, the proportion of unstarted projects increased. In the first half of the year, the company's revenue decreased by 34.33% compared with the same period last year, and the gross profit margin decreased by 1.95 percentage points. Under the combined effect of the two, the company's gross profit decreased by 53 million yuan compared with the same period last year. Although the three fees and income taxes have declined, it still cannot reverse the 66.23% decline in the company's net profit. At the same time, due to the continuous decline in order revenue, it is difficult for the company's operating income to pick up in the short term. From a quarterly point of view, in addition to being affected by the decline in project start and the decline in revenue and gross profit margin brought about by intensified competition, the increase in accounts receivable leads to an increase in the provision of bad debts, and the expansion of asset impairment loss is also one of the main reasons why net profit dropped sharply by 82.44% in the second quarter compared with the same period last year.

The company expects to achieve a net profit of 0.17 million yuan in the first three quarters, a year-on-year increase of-85 percent, 55 percent, and 0.02 million yuan. Based on this, the company calculates a net profit of 0.05 million yuan, a year-on-year increase of-93 percent, 50 percent, and EPS0.01~0.05 yuan. The company's main business is concentrated in Sichuan Province, with greater location advantages. At present, the urbanization of Sichuan Province is relatively low compared with the central and eastern regions, and there is still a lot of room for infrastructure investment in the future. As one of the few fully qualified road and bridge enterprises in the province, the company is expected to fully benefit.

It is estimated that the company's EPS in 2015 and 2016 will be 0.09 yuan and 0.24 yuan respectively, and the corresponding PE will be 77x and 29x respectively, maintaining the "overweight" rating.