A brief comment on the event
On July 8th, the company announced that it won the bid of 3.41 billion yuan for Taizhou Bay coastal highway project and municipal supporting PPP project, which has been included in the national PPP project database with no worries about landing.
Business analysis
Continuous winning large orders, PPP business acceleration: 1) this project includes the coastal highway project from Luqiao to Jiaojiang in Taizhou Bay Circular economy Industrial agglomeration Zone and municipal supporting facilities. The initial estimate of the project is 3.41 billion yuan, accounting for 111% of the company's total business volume in 2016, the budget floating rate is 13.00%, the social capital side financial internal rate of return (after tax) 4.95%, the project cooperation period is 15 years, of which the construction period is three years. Now the project has been included in the national PPP project database, landing worry-free 2) in addition, the company recently won the bid for "node lifting project from Kangqiao Road to Shangtang Road" in Liangzhu Street, Yuhang District, and "Reconstruction Project from Tongqiao to Guan Section of 35 Provincial Highway (S322), Xianju County, Zhejiang Province." the winning price is 274 million yuan / 130 million yuan respectively. This year, the company also signed a letter of intent for the PPP project of Chengzhong Village, Luqiao District, Taizhou City, involving an amount of 10 billion yuan. Many times to obtain large orders reflects the gradual enhancement of the company's ability to take orders under the tide of PPP, and the rapid growth of performance is worth looking forward to when the base is not high.
There is no need to worry about large financing space, and the winning report will continue to increase: 1) the company's bid-winning order reached 4.2 billion yuan in 2016 and 6.2 billion yuan in 2017, an increase of 47.7% over the whole of 2016. 2) at the end of the first quarter of 2017, the asset-liability ratio of Tengda Construction is only 37.06%, while that of Longyuan Construction and Hongrun Construction, both private construction enterprises, is 79.93% and 77.42%, which is much higher than that of Tengda Construction. The company's capital structure is more superior, and there is still more room for financing, so there is no need to worry about the funds to support the landing of the PPP project. 3) the prosperity of the rail transit industry is superimposed by PPP, and we predict that the company's future orders will continue to grow. In 17 / 18, the newly signed orders will reach 73 / 13.2 billion. According to the completion percentage method, it is estimated that the revenue of 17x18 will reach 63 / 10.2 billion, and the net profit will reach 3.1 / 610 million, which is + 274% of the same period last year. 4) the company's Q1 performance in 2017 increased 65 times to 35 million, with a low base of only 44 million in 2016.
The construction of hydrogen energy town will benefit Taizhou infrastructure big cake: 1) the company will enter the hydrogen energy industry and set up a hydrogen energy fund to raise 10 billion yuan in the first round, which is expected to invest in the upstream and downstream of the hydrogen industry chain; 2) to set up a joint venture with Chunhua hydrogen Energy Technology Co., Ltd. in Taizhou, Zhejiang Province, to jointly build a "Taizhou hydrogen energy town", operating in the mode of "platform + industry", the total investment will reach 16 billion yuan in five years. 3) during the 13th five-year Plan period, Taizhou City developed a total of 1158 major construction projects, with a total investment of 2.27 trillion yuan. Tengda has continuously won the bid for Taizhou large-scale infrastructure PPP projects, which is expected to benefit from the 13th five-year Plan.
Investment suggestion
We give the company a target price of 7-8 yuan over the next 6-12 months, corresponding to a 17-year PE valuation of 35-40 times, and maintain a buy rating.
Risk hint
Macroeconomic policy risk; order implementation is lower than expected.
