Events:
Event 1: the consortium composed of the company and the eighth Hydropower Bureau won the bid for the PPP Project of Sponge City Construction in Baiyuanhe District, Anyuan District, Pingxiang City, Jiangxi Province, with an estimated total investment of 156 million yuan, of which the company accounted for 54.8% of the project company.
Incident 2: the unaudited subsidiary Qamdo in Tibet competed for 212.1025 million yuan in operating income and 40.7198 million yuan in net profit in the first half of 2017.
Comments:
The next city outside the PPP area, with the help of power construction logic has been continuously verified. When the company won the bid for Guizhou high-speed PPP project, we thought that the PPP operation level of China Power Construction is very high, and the company's in-depth cooperation with China Power Construction will continue to further promote the "going out" strategy under the condition of controllable risk, taking advantage of the wind of PPP and taking advantage of China Power Construction. We note that Mr. Liu Zhonggang, vice chairman and general manager of the company, is also the deputy general manager of the eighth Hydropower Bureau, and the company can really carry out in-depth cooperation with Power Construction in corporate governance and business operation; after the meeting of "Central Enterprises to help enrich the people and invigorate Tibet", we believe that the cooperation between the company and Power Construction has been raised to a higher strategic level, and the cooperation between the two sides will be promoted to a deeper level. The PPP project of sponge city construction outside the target area of this cooperation not only further verifies the logic of going out of Tibet through power construction, but what is more gratifying is that we see that the company's business will extend from highway construction to the construction of sponge city, which will open up more market space for the company while improving its business capacity.
Qamdo strives for a substantial increase in profits, and the profits of the cement business can be increased. Qamdo, Tibet competes for 212.1025 million yuan in operating income and 40.7198 million yuan in net profit in the first half of this year, which is much higher than the revenue / net profit of 36,573.62 / 24.3867 million yuan in 2016. Due to the lack of construction in Tibet in the first quarter, cement shipments are relatively small, if the regional landscape demeanor maintains the status quo, we expect Changdu to compete for a net profit of 100 million yuan for the whole year, and the company can make a profit of 62 million yuan. The Tibet central line was ignited ahead of schedule, the company's clinker production capacity increased to about 1.8764 million tons, and the company's Qamdo high production capacity of 384400 tons, accounting for 20.5% of the company's total production capacity; considering that the transportation cost of coal in Lhasa and other places is lower than that in Qamdo area, Lhasa cement is more profitable than Changdu, we have reason to believe that the profits of the company's cement business will grow at a high speed this year.
Investment advice: with the help of the logic of power construction has been continuously verified, the company's business scope and business area is wider, and the market space is larger; Qamdo Gaozhang cement profitability has greatly improved, to a certain extent, reflecting the high prosperity of cement in the region and the high annual profit growth period of cement business, we expect the company's EPS in the next three years to be 0.59,0.73,0.80 yuan, corresponding to PE of 22X, 18X, 16X, to maintain the "buy" rating.
Risk hint: the progress of the PPP project is not as expected; the demeanor of the cement scene is lower than expected.
