Report guide
Event: on March 21, 2018, Yinlong Co., Ltd. announced its 2017 results: revenue of 2.178 billion yuan in 2017, an increase of 46.79% over the same period last year, and net profit of 118 million yuan, a decrease of 18.36% over the same period last year. The revenue exceeded our expectations by 17%, and the net profit was lower than expected by 18.6%.
The sharp increase in hard wire prices and financial expenses are the main reasons why revenue and net profit are not in line with expectations.
1) the company's prestressed steel wire products are priced by the cost addition method, in which the hard wire (wire rod) accounts for 85% of the cost. In 2017, the price of hard wire increased by 48% compared with the same period last year, the price of prestressed steel increased by 33% year-on-year, and sales increased by 16.5% over the same period last year, resulting in much higher revenue growth than expected. 2) the financial expenses increased by 30.783 million yuan compared with the same period last year, which is the reason why the net profit is much lower than expected. Of this total, interest in 2017 increased by 10.707 million yuan over the same period last year, and exchange losses increased by 20.076 million yuan compared with the same period last year.
The best part of a new round of high-speed rail investment is coming, and prestressed steel and high-speed rail slabs have entered a period of explosive demand.
During the 13th five-year Plan period, China added 11000 kilometers of high-speed railway, resulting in a demand of 5.7 billion yuan for prestressed steel wire, 13.2 billion yuan for steel strands and 24.5 billion yuan for rail plates. According to our statistics, more than 70% (about 8000 km) of high-speed rail will be completed and opened to traffic from 2018 to 2021. We speculate that 2018 to 2019 will be the root of the concentrated outbreak of demand for prestressed steel and high-speed rail slabs. According to our statistics, the mileage to be built for the designed speed 350km/h (including lines reserved for speed increase to 350km) during the 13th period will reach 8587 km, and the proportion of III track plates used is expected to increase from 16% during the 12th period to more than 78%.
There are many Yinlong track plate reserve projects, and the performance will be reversed in 18 years.
In terms of high-speed railway track plates: three plate factories have been put into operation, and two new plate factories will be built in 18 years. Among them, Huaiyang Plate Factory will supply a total of 50,000 track plates to Zhengfu passenger Special and Shanghang in the next two years. Ganzhou Plate Factory serves Jiangxi-Shenzhen high-speed railway and new lines in Jiangxi. Hejian plate factory will serve Jingxiong, Xiongshang, Xiongjin and other high-speed railways. Projects under discussion also include: Guangdong section of Jiangxi-Shenzhen high-speed railway, Beijing-Tangshan intercity, Zhengji passenger special line and other high-speed rail lines.
In terms of subway track plates: the company has completed the laying of the test sections of Tianjin Line 5, Line 6 and Urumqi Line 1, and is actively promoting the signing of the relevant agreements and project site selection for the track plates required by the Beijing New Airport Line, which indicates that the company has made a leap forward from the test section to the whole line in the urban rail transit project. With the substantial increase in the reserve of track plate projects with high gross margin, the company is expected to usher in a performance inflection point in 18 years.
Profit forecast and valuation
With a large volume of high-speed rail and rail transit / mileage to be built during the 13th five-year Plan, the company, as the only private enterprise with actual delivery experience of III rail plates, will be the first to benefit from the most exciting part of this round of high-speed rail investment and the improvement of III plate permeability. We estimate that the company's revenue from 2018 to 2020 will be 2.83 billion yuan, 3.095 billion yuan and 3.022 billion yuan, the net profit will be 175 million yuan, 208 million yuan and 181 million yuan, and the EPS will be 0.44,0.52,0.45 yuan per share. The corresponding PE is 31 times, 26 times and 29 times. Maintain the company's overweight rating.
Risk hint: the price of wire rod has risen sharply; the RMB has continued to appreciate sharply; the global trade war has intensified.
