Main points of investment:
Domestic construction machinery quality target, "one point and three lines" layout is ready to start. Relying on the "leading innovation" model to achieve differential competition, the company has become one of the top 50 construction machinery enterprises and the top 20 excavator enterprises in the world. In October 2016, the company also listed AVmax, a Canadian airline, in the field of strategic layout aviation equipment. At present, the company has formed an overall business pattern of "1.3 lines", that is, focusing on equipment manufacturing, engineering equipment, special equipment, and aviation equipment fly together; among them, engineering equipment is the company's traditional main business, and its performance is expected to grow steadily; special equipment is the company's flexible business and is stepping into a rapid development channel; aviation equipment is the company's new business, and AVmax will significantly thicken the company's performance.
Industry recovery + layout deepening, engineering equipment business ushered in an upward inflection point. The core products of the company's construction machinery business are piling machinery and excavation machinery. under the background of industry recovery, the company's revenue of pile machine and excavator in the first half of 2017 was 5.89 yuan and 493 million yuan respectively, an increase of 43.95% and 41.14% over the same period last year. Both businesses have ushered in a significant recovery. At the same time, the company continues to deepen its business layout. China Railway Shanhe, a joint venture company established in September 2016, has entered the Changsha urban rail market and has received an order of 600 million yuan for shield machines. With profound technical background, the company has formed a good reputation and reputation in the construction machinery industry.
With technological advantages and continuous layout, the business of special equipment is expected to continue to grow. The company's special clothing products mainly include a certain type of armored vehicles, 8-ton small digging, automatic mine clearance vehicles and other products; in terms of military products, the company has cooperated with the military for as long as 10 years. In 2017, it successively signed strategic cooperation agreements with China Ordnance Science Research Institute and China Huateng Industrial Co., Ltd., and its technical strength has been fully recognized by the industry. In terms of performance, the company's special equipment business achieved revenue of 73 million yuan in the first half of 2017, an increase of 137% over the same period last year. Under the background of deepening military-civilian integration, it is expected that the future performance is expected to continue to expand.
The acquisition of AVMAX ushered in a double inflection point of performance and strategy. From the performance point of view, Avmax is the top quality target in the global aircraft aftermarket, with a net profit of 206 million yuan from September 2015 to June 2016. According to the performance bet agreement, the annual performance bet limit for AVmax2016-2018 is 230 million yuan, which is expected to significantly increase the company's performance in the future. From a strategic point of view, after the completion of the acquisition of AVmax, the company will lay the road to industrial upgrading-entering the domestic civil aviation market, in which the core focus is reflected in two aspects: one is the aircraft passenger cargo conversion business, which is expected to benefit from the improvement of the industry prosperity; the second is to cooperate with the original subsidiaries to lay out the navigation industry chain, which will provide good flexibility for performance growth.
Maintain the company's "buy" rating. It is estimated that the net profit of the company from 2017 to 2019 is 234 million yuan, 345 million yuan and 471 million yuan respectively, and the corresponding EPS is 0.22 yuan per share, 0.33 yuan per share and 0.45 yuan per share respectively. According to the latest closing price of 7.17 yuan, the corresponding PE is 32,22 and 16 times respectively. The company's non-public offering shares were listed on November 12, 2017, raising a total of 1.979 billion yuan for the AVMAX 100% equity acquisition. We are optimistic about the development prospects of the company under the "1.3 line" layout and continue to maintain the company's "buy" rating.
Risk hints: the performance of construction machinery continues to decline significantly and the development of military business is lower than expected; non-operating income is not as expected; policies related to the navigation industry are not as expected; AVmax operating performance has declined significantly; and the risk of uncertainty in the acquisition of the remaining equity of AVmax.
