High performance and high probability of growth, prepare in advance to improve the layout of the industrial chain
As a landscape ecological enterprise in Jiangsu Province, it has been on the market for only more than a year, and its ability to sign orders has greatly increased. New contracts worth 2.24 billion yuan were signed in the first three quarters of 2017, and by the end of September 2017, we expect to have unfinished contracts worth 4.815 billion yuan, or 9.4 times the contract revenue of Prida. The company is improving the layout of the industrial chain, has completed the acquisition of Zhengzhou Water and Zhongwei International, looking forward to greater synergy. In addition, PPP is expected to become a new billing model and a source of incremental performance for the company in the future. With full orders and strong financing capacity, we judge that the company's high performance growth in 2017-18 is a high probability event. We covered for the first time, giving a "buy" rating.
Municipal gardens are booming, and real estate gardens remain stable.
Through the correlation analysis of urbanization rate and municipal garden fixed assets investment, we predict that the annual investment of municipal landscaping will reach 223.517 billion yuan in 2020. From the amount of investment per unit garden and green space area, we estimate that the investment in municipal landscaping will reach 230.126 billion yuan in 2020. We estimate that by 2020, the market space of real estate gardens will reach 249.375 billion yuan.
Construction orders on hand are full, and newly signed orders are increasing rapidly.
By the end of the third quarter of 2017, the company has full orders on hand, and we estimate that it will reach 4.815 billion yuan. 2.24 billion yuan of new contracts were signed in the first three quarters of 2017, exceeding the peak of 1.164 billion yuan signed the year before listing (2013). And the contract unit price reached 144 million yuan, much higher than the pre-listing contract unit price peak of 33.23 million yuan (2013). As the proportion of municipal garden and tourism landscape business in the newly signed contract has reached 96.9%, the proportion of income is expected to increase, and there is a certain risk of decline in gross profit margin.
Make full use of the capital platform to improve the layout of the industrial chain
The development of the company's business requires a large amount of capital investment, and the payback period is longer, and the financing ability is more critical. As of September 2017, the company's remaining credit line (nearly 800 million yuan) is sufficient, and diversified financing methods are adopted. The issuance of convertible bonds has received feedback, and we judge that there is a high probability of passing the issue. The company has improved the layout of ecological environment construction and completed the acquisition of 60% of Zhengzhou Water and 80% of Zhongwei International. These two targets and the company's main business have a strong synergy effect, the company can make use of Zhengzhou water conservancy and hydropower construction general contracting first-class qualification to expand the scope of orders, and make use of Zhongwei International's strong design ability to strengthen its own competitiveness. the company has strong implementation ability and strategic foresight.
Performance is expected to be high growth, extension synergy to be reflected, the first coverage, given a "buy" rating
We forecast that the EPS of the company in 2017-19 will be 0.44 EPS 0.79 Plus 1.10 yuan, and the net profit of YoY+103/80/39%, in the next three years will be CAGR+71.9%. At present, the average PE of garden listed companies is 28.25 times in 2017 and 19.41 times in 2018. The company's current share price corresponds to 37.07 times PE in 2017 and 20.65 times PE in 2018. We think the company is full of orders on hand, and the order-to-income ratio is as high as 9.4 times. The PEG of the company in 2018 is 0.26, which is lower than that of the industry leader Oriental Gardens. We believe that we can give the company a certain valuation premium of 25-30x PE in 2018, corresponding to a reasonable price range of 19.8-23.7 yuan, covering for the first time and giving a "buy" rating.
Risk hint: the risk that the order is transformed into the risk that the income is lower than expected, and the performance of the target of extension M & A falls short of the expected risk.