Brief comment on performance
On October 27, the company released its report for the third quarter of 2017. In the first three quarters, the company's revenue / return net profit / non-return net profit was 23.0 billion, respectively, compared with the same period last year. + 9.72%, 129.85%, 130.50%; the basic EPS in the first three quarters was 0.09 yuan per share, + 80% compared with the same period last year; and the weighted ROE in the first three quarters was 2.95%, year-on-year + 0.02pct.
Business analysis
The operation was stable and the net profit increased significantly: 1) the revenue / return net profit of the company in the first three quarters was 1.38 billion respectively, compared with the same period last year, which was + 9.72% + 129.85%, of which Q3 revenue / return net profit was 773 million respectively. The main reason why the increase of homed net profit is much higher than the increase of revenue is that the sales / management / financial expenses of ① in the first three quarters of 2017 are 17.8% higher than the same period last year. 6.9% Lashi 83.1%, the total three fees decreased by 73 million, and the sharp reduction in financial expenses was caused by the reduction of company borrowing and the collection of interest on the financing funds of Party A. The 32 million decrease in ② business tax and additional tax compared with the same period last year is due to the change of turnover tax from within-price tax to extra-price tax after the "operation change". These two factors together led to a 105 million increase in profits. 2) the net operating cash flow in the first three quarters was-126 million, which turned negative from 67 million in the same period last year, which was due to the increase in project deposit, wages and taxes in the current period. 3) the gross profit margin / net profit rate of the company in the first three quarters was 13.32% / 5.73% respectively, which was + 0.77pct/+3.00pct compared with the same period last year. The reduction of taxes and financial expenses significantly increased the company's net profit. 4) at the end of Q3, the asset-liability ratio of the company is only 42.07%, which is much lower than Longyuan Construction (82.65%) and Hongrun Construction (77.17%), which are both private construction enterprises. 5) the loss of asset impairment from January to September was 24 million, an increase of 324.47% over the same period last year, mainly due to the increase in the construction of the PPP project and the increase in the provision for accounts receivable and other bad debts.
With the rapid expansion of business, the company and its subsidiaries have won a total of 8 bid-winning projects in the first three quarters of 2017, and the number of bid-winning projects is the same as that of the same period last year. Among the bid-winning projects in the first three quarters, the total bid-winning amount of single construction contract project / PPP project is 2.51-32.2 billion, with a year-on-year increase of 220.3% and 25.7%, and the business is in a period of rapid expansion. Since 2015, the company has signed PPP projects (including framework agreements) of about 17.4 billion yuan, which is 5.7 times the revenue in 2016. it is worth looking forward to the high performance in the future. 2) in July, with the approval of the company's board of directors, Sun Company invested 250 million to join hands with CRRC and Gangtai to establish a Shanghai Green vein Chiwan Enterprise Management Partnership, and the partnership and Yangpu District Government guided the fund to jointly set up the CRRC Green Mother Fund, which aims to provide financial guarantee for the joint venture subsidiary PPP project. This investment will help to expand the company's investment in the field of PPP business, broaden the channels to undertake PPP business, and lead to a high increase in PPP orders in the future.
The company has full qualification and strong strength, and is expected to benefit from the big cake of Zhejiang-Shanghai infrastructure: 1) the scale of the infrastructure market is vast: by the end of 2016, the investment of the Ministry of Finance / NDRC PPP project is 1.27 trillion, accounting for 9.4%, 15.9%, Zhejiang transportation facilities project investment of 1.2 trillion yuan (double that of the 12th five-year Plan), Taizhou plans to complete traffic fixed assets of 18 billion yuan in 2017. The investment scale of Shanghai rail transit is expected to reach 600 billion yuan according to the world urban rail transit density. 2) the company has ploughed Zhejiang / Shanghai. Since 2016, Zhejiang and Shanghai have accounted for 87% of the orders and 63% of the total orders. the company is fully qualified and strong, and will fully benefit from the infrastructure cake of the two places.
Investment suggestion
We give the company a target price of 6.72 yuan over the next 6-12 months, corresponding to a 17-year PE valuation of 39 times, maintaining a buy rating.
Risk hint
Macroeconomic fluctuation risk; order implementation is lower than expected; deregulation risk; inventory price risk.
