Main points of investment

Event

The company released its semi-annual report for 2017. during the reporting period, the company realized operating income of 2.159 billion yuan, down 5.90% from the same period last year, realized net profit of 590 million yuan, down 20.22% from the same period last year, and deducted 343 million yuan from non-net profit, an increase of 17.57% over the same period last year.

The current income is basically flat, and non-net profit is deducted to achieve growth.

During the reporting period, the company achieved revenue of 2.159 billion yuan, a slight decrease of 5.90% compared with the same period last year. Of this total, the revenue from general services was 1.471 billion yuan, which was basically the same as last year; the revenue of the refined oil business increased by 3.79% to 411 million yuan due to the increase in unit price of sales; and the number of engineering projects decreased due to the slow down of highway construction. As a result, revenue from other businesses decreased by 23.26% to 230 million yuan, while revenue from other businesses decreased by 50.51% to 46.7902 million yuan. The company's asset-liability ratio is 51.52%, an increase of 0.50 percentage points over the beginning of the year, with good solvency.

The company's homing net profit fell 20.22% compared with the same period last year, mainly due to a high base of investment income realized by the transfer of Guosheng Securities in the same period last year. After deducting the impact of non-recurring profit and loss items, the non-net profit was deducted by 343 million yuan, an increase of 17.57% over the same period last year, indicating that the main business is in good condition.

During the reporting period, the cost control effect was good, the depreciation and amortization cost decreased slightly, and the maintenance cost decreased significantly compared with the previous period, resulting in a year-on-year increase of 4.42pct to 57.22%. The company operates and manages 8 expressways, and the income and gross profit margin of different sections are slightly different.

Affected by the opening of traffic and the improvement of the road network, the income of Jiujing, Penghu and Changtai increased: the opening of the Quzhou section of Hangzhou-Xinjing Expressway led to the growth of Jiujing Expressway service income; the opening of Madang Station on the provincial boundary of Penghu Expressway led to the rapid growth of Penghu Expressway Service income; the improvement of the road network increased the number of cross-provincial traffic, and the service income of Zhichang Tai increased significantly.

Due to the influence of diversion, the traffic flow of Changjiu, Changzhang and warm and thick decreased: the traffic flow of Changjiu, Changzhang and warm and thick highways decreased obviously due to the influence of the opening of Changjiu Avenue and Dongchang Expressway.

In terms of gross profit margin, the gross profit margin of most of the core roads increased, the gross profit margin of Changtai Expressway increased by 1.96pct to 72.49% compared with the same period last year, that of Jiujing Expressway increased by 4.85pct to 70.05%, that of Changjiu Expressway increased by 3.07pct to 61.81%, that of Changzhang Expressway decreased by 1.25pct to 60.06%, and that of warm and thick Expressway decreased by 13.02pct to 26.61%. Penghu highway gross profit margin increased by 65.02pct to 1.66% year-on-year; Penghu highway gross profit margin increased by 36.91pct to-47.49% year-on-year.

Profit forecast and investment suggestion

It is estimated that the EPS of the company from 2017 to 2019 is 0.37,0.39,0.45 yuan, and the corresponding PE is 15 times, 14 times and 12 times. Highway industry PE median value 15 times, PB median value 1.5 times, the company PB valuation is lower than the industry average, in a clean state, considering the completion of the company's core highway reconstruction and expansion project, the main business uncertainties are eliminated. For the first time, the target price is 6.2 yuan, given a "buy" rating.

Risk hint

The risk of road network diversion, the risk of business development, the risk of policy change.