Core ideas:
In the first half of 2017, the company achieved operating income of 2.158 billion yuan, down 5.9% from the same period last year, and realized net profit of 589 million yuan, down 20.2% from the same period last year. The net profit after deducting non-return was 343 million yuan, an increase of 17.6% over the same period last year. The first half of the year realized earnings per share of 0.25 yuan.
A slight drop in toll revenue, proper cost control and an increase in gross margin
The company's toll revenue in the first half of 2017 was 1.471 billion yuan, down 2.18 percent from the same period last year.
Among them, due to the diversion influence of the opening of Changjiu Avenue and Dongchang Expressway, the revenue of Changjiu Expressway and Changzhang Expressway decreased by 6.8% and 9.6% respectively compared with the same period last year. However, the opening of the Quzhou section of Hangzhou-Xinjing Expressway increased the revenue of Jiujing Expressway by 11.8% and that of Changtai Expressway by 15.7%. Make up for the decline in income of Changjiu and Changzhang Expressway.
In the first half of the year, the cost of the company's main highway business was properly controlled, down 11.3% compared with the same period last year. Among them, maintenance costs decreased by 53.4% compared with the same period last year, depreciation and amortization decreased by 7.6%, and other operating costs decreased by 12.5%. Proper cost control led to an overall increase in the gross profit margin of the main business of the highway by 4.42% to 57.2%, which was the main reason for the increase in net profit after deducting non-return in the reporting period.
The decline in return net profit is mainly due to the large amount of non-recurrent income in the same period last year.
During the reporting period, the company's net profit fell by 20.2% compared with the same period last year, mainly due to the transfer of Guosheng Securities to achieve investment income of 547 million yuan in the same period last year, with a high profit base. In the same period this year, the company's non-recurrent income was 278 million yuan in government subsidies, which was lower than that of last year, resulting in a decline in the net profit of the current period.
Investment advice: low valuation and steady growth, give buy rating
It is estimated that the EPS of the company in 17,18 and 19 years is 0.38,0.40,0.44 yuan respectively, corresponding to the latest closing price PE of 15.3X, 14.5x, 13.2X. At this stage, the company has no follow-up road construction plan, and the uncertainty of the main business is gradually eliminated. The company's PB valuation is significantly lower than the industry average (the current PB is only 0.98, which is the only broken stock in the highway sector), maintaining a "buy" rating.
Risk hints: toll revenue does not meet expectations; toll policy changes; new road property diversion.
