Event: the company released its three-quarter report in 2017. from January to September, the company achieved an income of 1.514 billion yuan, an increase of 10.73% over the same period last year, a net profit of 145 million yuan, an increase of 11.18%, and a deduction of 1.40 yuan for non-net profit, an increase of 7.11% over the same period last year.
The results in the third quarter are in line with expectations and are expected to improve significantly in the fourth quarter compared with the same period last year. The company's three-quarter report is within the range of 10% of the results forecast, which is in line with our expectations. On the revenue side, the company's revenue growth rate in the first three quarters was 10.73%, which was slower than the 19.46% reported in the middle of the year, mainly due to the settlement of project construction. We expect the company's fourth-quarter growth rate to be better than that of the third quarter. On the profit side, the company's gross profit margin fell 3.12 percentage points to 23.05%, sales expense rate and management expense rate were 3.28% and 7.15% respectively, down 0.11% and 0.44% respectively. Overall, the company's net profit margin reached 9.45%, down 0.48 percentage points. The company lost 19.46 million yuan in the fourth quarter of 2016 for two reasons: first, the project income could not be settled in time due to the poor progress of some hospital construction projects; second, the sharp increase in accounts receivable led to a substantial increase in the provision for bad debts compared with the same period last year. We expect these two factors to improve significantly in the fourth quarter of 2017, and the company's full-year results are significantly faster than in the third quarter.
The company has sufficient orders on hand, and the growth of performance in the later period is guaranteed. In 2017, the company frequently won the bid for medical construction projects. In May 2017, the company signed the overall relocation project of Jiaxian traditional Chinese Medicine Hospital, with a contract price of 133 million yuan. In June, it signed the construction project of the new hospital area of Heshan people's Hospital, with a contract price of 376 million yuan. In July, it signed the relocation project of Dushan County traditional Chinese Medicine Hospital and people's Hospital, with a total contract price of 700 million yuan. According to the company's three quarterly reports, the order on hand reached 6.5 billion yuan. Sufficient orders support later performance growth.
The extension expands the upstream and downstream of the traditional main business, creates the whole industry chain, and lays out the comprehensive medical platform:
Based on the traditional main medical professional engineering, the company uses the means of M & An investment to extend the business of design service and hospital construction engineering upward, and to lay out hospital logistics services and medical consumables sales and other industries downward. Shangrong, a wholly-owned subsidiary of the company, has invested 200 million yuan to jointly set up Shangrong Gaoying medical industry M & A fund and 287 million yuan to jointly set up Shangrong Ping an medical M & An industry fund to speed up the integration of medical industry resources. Through the overall hospital construction business, the company provides customers with services such as the management of hospital construction projects, the implementation of medical professional projects and the configuration of medical devices, and gradually build up a chain covering hospital construction engineering, medical professional engineering, medical software development, medical equipment sales, medical consumables sales, hospital logistics trusteeship, hospital construction and investment. As private capital is encouraged by policies to enter the medical and health field, the company will also deeply participate in the mixed ownership reform of public hospitals, develop PPP model projects, build four major industrial platforms, such as medical logistics, consumable materials production and marketing, equipment production and marketing, and hospital investment, and on this basis, with the help of Internet technology, integrate offline medical resources, timely carry out mobile medical services, and rapidly expand the scale of medical service resources.
Investment suggestion: increase your holdings-An investment rating, with a 6-month target price of 13.20 yuan. It is estimated that the net profit of the company from 2017 to 2019 is 1.71,2.19 and 270 million yuan respectively, and the EPS of the company from 2017 to 2019 is 0.26,0.33 and 0.41 yuan respectively, and the corresponding valuation of the current stock price is 38X, 30X and 24X respectively. Given an investment rating of-A for the first time, the six-month target price is 13.2 yuan, equivalent to a dynamic price-to-earnings ratio of 40 times in 2018.
Risk Tip: the execution of the order is not as expected.
