Brief comment on performance
The company released semi-annual report that in 2017 H1 realized revenue / net profit of returning to home / deducting net profit of 15.28pm / 86 million yuan, which was-0.2% less than that of the same period last year and 93.8% of the same period last year, which is in line with market expectations.
Business analysis
The operation is stable and good, and there is no need to worry about real estate losses: 1) the company's H1 revenue is 1.53 billion (- 0.2%), the operation is relatively stable, Q1/Q2 revenue is 670 million (- 3.5%) / 860 million (+ 2.5%), Q2 revenue growth increases, 5.9pct turns negative to positive, revenue performance is good. The net profit of H1 is 86 million, which is + 91.6% compared with the same period last year. The main reason is that the sales / management / financial expenses of ① H1 are-2.6% compared with the same period last year. The total reduction of three fees is 59 million, the reduction of management expenses is caused by the reduction of operating expenses, and the sharp reduction of financial expenses is due to the reduction of company borrowing and the collection of interest on the financing funds of Party A. ② taxes and surcharges decreased by 29 million compared with the same period last year; due to the combination of credit risk characteristics, the amount of accounts receivable in the provision for bad debts increased with business expansion, resulting in a 18 million increase in asset impairment loss this year compared with last year, which is a normal phenomenon in the process of business expansion; these three factors together led to a 70 million increase in profits. 2) there is no need to worry about losses in the real estate business: ① H1 real estate business has a revenue of 80 million and a gross profit of-8 million (gross margin-10.4%, a decrease of 32.7pct compared with the same period last year). We judge that the high cost of real estate sales in second-and third-tier cities leads to losses. ② 's main construction business contributes 1.4 billion of revenue (92%) and 180 million of gross profit (gross profit 12.94%, year-on-year increase of 1.7pct). The development of construction business is good, which makes up for the losses caused by the real estate business. In the future, the real estate business will mainly absorb the stock (H1 real estate inventory decreased by 12% year-on-year this year). The impact on performance is not enough to worry about.
The superior capital structure ensures the financing space, and the business development increases the cash flow expenditure: 1) the company's capital structure ensures the financing space: the asset-liability ratio of H1 Tengda construction is only 39.77%. While Longyuan Construction and Hongrun Construction, which are both private construction enterprises, have a debt ratio of 81.55% and 77.97%, which is much higher than that of Tengda Construction. 2) the operating / investment / fund-raising cash flow of the company is-2.1Mab 3.5max-310 million, compared with the same period last year. The reason for the change is: the increase of ① construction procurement expenditure and tax payment leads to the increase of operating cash flow expenditure; the decrease of financing funds of ② PPP project leads to the decrease of investment cash flow expenditure. ③ issued 800 million yuan of corporate bonds in the previous period, but the non-issuance of the current issue led to an increase in fund-raising cash flow expenditure.
The vast scale of Zhejiang-Shanghai infrastructure market ensures the order base, and CRRC will expand the PPP order margin again: 1) the company ploughs Zhejiang / Shanghai deeply. In 2016, Taizhou / Shanghai orders accounted for 62% / 14%. According to the world urban rail transit density, the rail transit investment in Shanghai is expected to reach 600 billion yuan. Taizhou plans to complete traffic fixed assets of 18 billion yuan in 2017. The company is expected to benefit from the big cake of infrastructure in both places, and the market scale is broad. 2) join hands with CRRC to build a joint venture investment subsidiary and propose to set up a fund to provide financial guarantee: ①, in addition to financing by means of private issuance and bond issuance, recently plans to join hands with CRRC and Gangtai to set up a Shanghai Green vein Enterprise Management Partnership, which will be jointly funded by the partnership and Yangpu District Government to set up a CRRC Green Mother Fund, which aims to provide financial guarantee for the joint venture subsidiary PPP project The reform bill has been passed by the board of directors. The ② joint venture subsidiary is backed by the rail traffic leader and has obvious resource advantages. This investment will help to expand the company's investment in the field of PPP business and broaden the channels to undertake PPP business. PPP orders can be increased in the future.
Investment suggestion
We give the company a target price of 7-8 yuan over the next 6-12 months, corresponding to a 17-year PE valuation of 35-40 times, and maintain a buy rating.
Risk hint
Macroeconomic fluctuation risk; order implementation is lower than expected; deregulation risk; inventory price risk.
