Events:
The company released an interim report in 2017, with revenue of 1.519 billion yuan in the first half of the year, an increase of 20.99% over the same period last year, and a net profit of 200 million yuan, an increase of 154.56% over the same period last year.
Comments:
The volume and price of cement increased greatly, and the progress of the project business was not as expected. In the first half of the year, Tibet and Qamdo sold a total of 2.18 million tons of cement (including 1.75 million tons of shares and 430000 tons of Qamdo), an increase of 440000 tons over the same period last year (25.29%). The company's cement sales revenue was 1.294 billion yuan, a big increase of 70.32% over the same period last year. Due to the lack of contract stock of engineering projects in the first half of the year, the late time of bidding in the market, the construction of new winning projects started one after another, and on the whole, the construction of the Laluo water conservancy project that has already started is very difficult, and the construction progress is slow. The business income of construction business decreased significantly by 67.93% compared with the same period last year. Although the cement price increased greatly in the first half of the year compared with the same period last year, the cost also increased in the same period. The gross profit margin of cement in the current period only increased by 0.84pct to 28.49%. The gross profit margin of construction business increased significantly to 46.61%, mainly due to the pre-settlement handled by the owners, the increase in housing construction income and the increase in gross profit margin to 99.05%. The overall gross profit margin increased to 29.46% by 9.80pct. In the first half of the year, due to the increase in the management expense rate from 7.99% to 8.57%, the expense rate during the period increased from 0.70pct to 10.77% compared with the same period last year. The loss of bad debts in the current period was 13.19 million yuan, compared with-650000 yuan in the same period last year. The investment income from investment in high-tech building materials was 41.71 million yuan, an increase of 21.7 million yuan over the same period last year, and the net interest rate for the current period increased from 8.86% to 17.82%.
PPP steadily promotes the warming of the construction of the power project, and the increment of building materials business continues. The total investment of the Guizhou highway PPP project that the company won the bid is estimated to be 11 billion yuan, the construction period is 3 years, and the company accounts for 10.5%. At present, the company is preparing to set up the project company and the preparatory work. The consortium formed by the company and the eighth Bureau of China Water Conservancy and Hydropower is implementing the "sponge city construction PPP project in Baiyuan River District, Anyuan District, Pingxiang, Jiangxi Province, with a total investment estimated of 155 million yuan." the company's construction business is expected to pick up with the development of the project in the future. In the first half of the year, the company's Zangzhong cement began trial operation in April. In addition, from the point of view of projects under construction, the company's 1 million square meter aggregate production line project has been started, with the expansion of cement production capacity and the promotion of aggregate business. The company's building materials business continues to increase.
Investment suggestion: we expect the company's revenue in the next three years to be 32.10,37.67,4.435 billion yuan, EPS is 0.59,0.73,0.80 yuan, corresponding to PE is 19x, 15x, 14x, maintain the "buy" rating.
Risk hint: the progress of the PPP project is not as expected; the new production line is not as expected.