The performance exceeded expectations and maintained the "buy" rating.
The company released the 2017FY annual report on the evening of March 26, with revenue of 1.037 billion yuan in 17 years. YoY+102.94%, realized net profit of 137.23% and 169 million yuan, deducting non-parent net profit of 137.23%. The YoY+142.52%, performance exceeded our and market expectations, and the high performance growth was mainly caused by the high growth of its own engineering business and the combination of Zhengzhou Water and China International. After deducting the consolidation factor, we measure the YoY+67.8%, performance growth rate of the company's endogenous income YoY+93.1%. The company signed a newly signed order of 2.644 billion yuan in 17 years, which is 2.55 times the 17-year income. We believe that after the merger and acquisition of Zhengzhou Water and Zhongwei International, the company's order-taking capacity is expected to be further enhanced, and the existing financing capacity can also fully ensure the landing of the project. high growth is expected in the future, maintaining the "buy" rating.
Strategic optimization of revenue structure, sufficient on-hand orders, high growth momentum
In the past 17 years, the company has actively transformed from engineering construction to ecological cultural travel, adding eco-tourism landscape (287 million yuan) to the income composition, as well as new revenue from pipeline sales, water conservancy projects and consulting services in Zhengzhou, and table Zhongwei International (20 million yuan) has increased the company's design income by nearly 33 times. The company's traditional main project income is 559 million yuan, YoY+10.1%. We believe that the new business provides good conditions for the company's strategic transformation. The growth rate of endogenous income of 17Q1-Q4 company is 132%, 29%, 55%, and 148%, with seasonal characteristics, and the overall growth rate increases gradually during the peak period of income recognition. The company announced that the newly signed contract value in 17 years is 2.644 billion yuan, and the total contract value of projects under construction at the end of 17 years is 3.848 billion yuan. We estimate that the order in hand at the end of 17 years is 4.797 billion yuan, which is expected to promote the high income growth in the future.
Gross profit margin has declined slightly, focusing on the continuity of the rising trend of net profit margin.
The company has a 17-year gross / net interest rate of 31.99% and 18.31%, year-on-year change-0.33pct/4.23pct. The decline in gross profit margin is mainly due to the reduction of 3.1 PCT in engineering business, which accounts for more than 50% of income. the elimination of one-time factors affecting gross profit margin and the increase in the proportion of high gross profit business such as water conservancy / design are expected to have a positive impact on gross profit margin in the future. The sharp increase in the company's net interest rate is mainly due to the decrease in the expense rate during the period and 4.14pct, in which the decrease in the management expense rate in 1.79pct reflects the scale effect, and the decrease in the financial expense rate in 2.44pct is caused by raising funds instead of interest-bearing liabilities after listing. We believe that in the future, in the case of rapid business expansion, the financial expense rate and the proportion of asset impairment loss to income may increase, and the rising trend of net interest rate remains to be verified.
The negative operating net cash flow is in line with the law of the industry, and the financing capacity is sufficient.
The net operating cash flow of the company in 17 years is-66 million yuan, compared with 30 million yuan in the same period of 16 years. We estimate that the net outflow of CFO is mainly due to the increase in advance payment caused by the large-scale construction of hand-on orders. We believe that the company's financing capacity has a high degree of protection for the landing of orders: 1) the company discloses that the annual credit line of the bank is about 1.5 billion yuan, and the 17-year loan balance of about 150 million yuan is equivalent to the cash on hand; 2) the company has made a feedback on its proposed issuance of 330 million yuan of convertible bonds; 3) We expect the company to carry out PPP project financing in the form of industrial funds in the future. 4) the company has set up a collection department for accounts receivable. We estimate that the amount of receivables that have met the collection conditions is about 1 billion yuan, and it is expected to recover about 500 million yuan in 18 years.
Performance is expected to continue high growth, equity incentives show confidence, maintain the "buy" rating
The conditions for exercising the draft equity incentive of the company are 80%, 70%, 70%, 50%, 80%, 70%, 50%, respectively, in 18-20 years, demonstrating high confidence in growth. We raise our 19-year profit forecast for 18 EPS, and estimate that for 18-20 years, we will increase the profit forecast for 18-20 years to 0.93, 1.59 and 2.47 yuan (1.39 yuan, 0.81) for CAGR+69%. With reference to the 18-year industry average PE16.3X of the garden, the approval gives the company 18-year PE 16X-18X valuation level, adjusts the reasonable price range to 14.88-16.74 yuan (original value 14.58-16..2 yuan), and maintains the "buy" rating.
Risk hint: 18-year order execution is not as expected; a sharp increase in financial costs leads to a decline in net interest rate.