Events:
According to the 2017 interim report released by the company, during the reporting period, the company achieved operating income of 3.025 billion yuan, an increase of 54.85% over the same period last year; operating profit of 331 million yuan, an increase of 55.52% over the same period last year; and net profit belonging to shareholders of listed companies was 269 million yuan, an increase of 32.78% over the same period last year.
Comments:
The domestic business is bright, and the operating cash flow has improved significantly. In the first half of the year, the company's engineering general contracting business income increased by 42.36% compared with the same period last year, and decoration projects increased by 92.03%. From a regional point of view, Hong Kong and overseas revenue decreased slightly by-2.02%. Thanks to the increase in PPP and general contracting projects, domestic operating income increased by 222.11%. Domestic revenue has surpassed that of foreign countries, accounting for 0.53% of total revenue in the same period last year. The gross profit margin of the general contract for the current phase of the project decreased by 2.59pct to 25.45% compared with the same period last year, and the gross profit margin of the decoration project increased from 16.40% to 18.94%. Due to the relatively large proportion of the general contract, the comprehensive gross profit margin decreased by 1.91pct to 23.32% compared with the same period last year. Due to the increase in long-term loans and exchange losses, the rate of financial expenses increased to 4.62% from 3.58% in the same period last year, the rate of management expenses decreased from 1.64pct to 4.14%, and the rate of expenses during the period decreased slightly from 9.84% to 9.36%. Due to the receipt of 29.07 million yuan in compensation for demolition in the same period last year, but without this project in the current period, the return net profit increased by 32.78% less than the growth rate of operating income and operating profit. While operating income increased significantly, the net operating cash outflow for the current period decreased by 57.35%, mainly due to a substantial increase in cash-to-cash ratio from 0.41 to 0.57 in the same period last year, while the payment-to-cash ratio decreased from 0.79 to 0.63.
There are plenty of overseas orders and rapid development at home. By the end of the reporting period, overseas business had won unfinished orders worth 40.518 billion yuan, which was 8.69 times the revenue in 2016, and overseas orders-on-hand were extremely abundant. The company increases investment in domestic health care and infrastructure PPP business, through the introduction of technical and management authoritative experts in medical and construction fields, and sets up a competitive business team with senior talents to accelerate the national layout of PPP business. Since 2016, the company has won bids for a number of medical and infrastructure PPP projects, with current domestic orders of 5.873 billion yuan, providing a good project support for the company's future performance. The company plans to move its subordinate construction companies to Xiongan New District, which will help the company to carry out business in this area and accelerate the development of domestic business.
Cambodia project launch, fixed increase landing, the company can look forward to the future. The first phase of the US $620 million 5 million t / a refinery project in Cambodia began in May, which will have a positive impact on the company's revenue and performance in the next few years. The company's debt ratio has reached a high of 78.74% in this period, and the financial pressure is great. A few days ago, the fixed increase of 900 million was approved. After the completion of the fixed increase, it will significantly reduce the company's asset-liability ratio (expected to reduce 10pct), optimize the capital structure, enhance the company's capital strength, and lay a solid foundation for the company's future development, and the current stock price has been substantially inverted from the fixed increase price.
Financial Forecast and valuation: we forecast that the company's EPS for 2017-2019 is 0.44,0.67,0.95 yuan, corresponding to PE of 16X, 11x and 8X respectively, which will be upgraded to "buy" rating.
Risk hint: the landing of overseas projects is not as expected, and the development of domestic PPP projects is slow.