The performance of China News has increased significantly: Xingyuan Environment released its 2017 mid-year report in early August 2017. In the first half of 2017, the company achieved operating income of 1.52 billion yuan, an increase of 83.62% over the same period last year. The net profit attributable to the parent company was 260 million yuan, an increase of 116.13% over the same period last year. Net profit attributable to the company excluding non-recurrent profit and loss was 186 million yuan, an increase of 63.26% over the same period last year and basic earnings per share was 0.26 yuan. Basically in line with market expectations for a substantial increase in its performance.
Brief comment of the China News: except for the slight decline in dredging revenue, the other sectors have achieved rapid growth of more than 100% compared with the same period last year. At the same time, the gross profit margin of each section has declined slightly. The main reason for the slight decline in gross profit margin is that in addition to the PPP undertaken by Xingyuan this year, various subsidiaries may undertake some of the outsourced EPC projects from outside, with a lower gross margin than the business they undertake. On the other hand, due to the fierce competition in the PPP market, the gross profit margin has dropped a little, but one of the criteria for Xingyuan's own projects is that the gross profit margin is more than 25%, and its own costs are also under control. therefore, it is expected that after the share of PPP projects led by Xingyuan increases in the second half of the year, the gross profit margin should remain near the historical average.
Progress of fixed-increase mergers and acquisitions: the company issued a fixed-increase merger and acquisition plan on March 23, 2017, and passed a shareholders' meeting on June 10, 2017, and is currently responding to the feedback of the CSRC.
Fixed increase plan and adjustment: the company intends to issue shares to all the source environmental protection shareholders to buy its 100% stake in the source environmental protection, the transaction price is 550 million yuan, all through the issue of shares. The original issue price was 42.61 yuan per share, with a total of 1290.78 shares issued. Later, Yingxing implemented the 2016 annual profit distribution on June 20, 2017, paying a cash dividend of 0.50 yuan (including tax) to all shareholders for every 10 shares, while using the capital reserve fund to increase equity, increasing 10 shares for every 10 shares. After the implementation of profit distribution, the price of this issue is adjusted to 21.29 yuan per share, and the number of shares issued is adjusted to 25.834 million shares.
Source state environmental protection commitment profit: source environmental protection all shareholders promise source environmental protection 2017, 2018 and 2019 consolidated financial statements after deducting non-recurrent profits and losses, the net profit attributed to the owner of the parent company is not less than 38 million yuan, 47 million yuan and 57 million yuan, respectively.
Profit forecast and investment strategy: the total amount of PPP bid-winning projects disclosed by the company from 2015 to August 16, 2017 is 9.85 billion yuan, and the bid-winning amount shows a significant trend of rapid growth year by year. If Source Environmental Protection completes the acquisition at the end of the year, but only begins to consolidate for the whole year in 2018, and the original growth of the company's business maintains a good momentum, and the second half of 2017 and 2018-2019 continue to maintain the high-speed growth of PPP bid amount, the company's consolidated net profit from 2017 to 2019 is expected to be 540 million yuan, 780 million yuan and 950 million yuan, respectively. The corresponding EPS is 0.52,0.75,0.91 yuan respectively. The valuation for 2018 is 38x. Maintain prudent recommendation ratings.
Risk hint: project acquisition, construction and production schedule is not as expected, receivable risk, market risk.
