Main points of investment
Core point of view: 1) the market believes that the growth rate of the public building decoration industry is slowing down, and the development of the company's main business is under pressure.
We believe that in the short term, the number of unfinished orders signed by Q4 in 2017 is 5.47 billion yuan (2.966 billion yuan in 2016, an increase of 42% over the same period last year), and the order reserve continues to increase and is enough to support the company's main business revenue to stabilize and improve in the next two years. In the long run: stable demand for public clothes in the future, such as culture, medical care, and transportation systems, + nearly trillion-level stock renovation to open the growth of the industry in the next 10 years, the company, as a leading company in the public clothing industry, is expected to maintain stable growth through internal optimization; 2) the company's educational transformation fell short of expectations, and the market was worried about the weak subsequent growth of the education sector.
We believe that in the non-academic education sector: the negative impact of the policy has been digested, and the internal and external adjustment of Xuelsen and cross-examination education is expected to usher in marginal improvement; at the same time, with full-time integration team and abundant financial advantages, it is expected to continue to increase the layout of the private higher education industry, further. Improve the company's education sector ecological thickening company performance.
Main business recovery + marginal improvement of vocational education training + intensive increase of shareholders to build multi-layer safety cushions. The total number of unfinished orders signed by the company's main business of public clothing continued to increase in 2016, until 2017Q4 had 5.47 billion yuan of unfinished orders, which could support the growth of the company's main business in the next two years. After the adjustment in 2017-2017, the negative impact of external policies has been eliminated, internal management has been adjusted, 95% of Xuelsen products have been restored, and the vocational education and training section is expected to achieve marginal improvement. At the beginning of 2017, the company completed the issuance of 52 million additional shares to core backbones and employees as equity incentives, accounting for 4.58% of the total equity. Since May 2017, the shareholders of the company have increased their holdings by a total of 170 million yuan, with an average price of 5.50 yuan per share, demonstrating the confidence of the company's shareholders. at the same time, the current stock price inversion rate of more than 22%, to build a safety pad.
Vocational training transformed diploma vocational education, cut into hundreds of billions of private higher education industry. The company intends to acquire 51% and 55% of the parent company of Sichuan City Vocational College and Guangzhou Foreign-related Economic Vocational and Technical College at a price of 510 million yuan and 340 million yuan respectively. Among them, Sichuan New concept Company, a shareholder of Sichuan City Vocational College, committed a performance commitment of 6500amp 7500 / 85 million yuan from 2018 to 2020. Sichuan City Vocational College currently has 14000 students. Considering the dual drive of the recent promotion qualification of the school and the expansion of nearly 10,000 degrees in the new campus, the number of students is expected to increase positively in the future. Guangzhou Foreign-related Vocational and Technical College currently has 13000 students, considering the ceiling of the main building of the new campus in 2017, which is expected to bring performance growth in the near future.
Private colleges and universities have large industry space and high barriers, and M & An integration has become a breakthrough in development. The market size of China's private higher education industry in 2016 is 103 billion yuan, and the subsequent YOY+11.7%, is expected to benefit from the improvement of the student population base, tuition fees and gross enrollment rate to drive the industry to continue to grow; however, due to the implementation of the new school, individual school approval raises the threshold for running a school is high, mergers and acquisitions have become an important breakthrough into the industry, the current company account funds are abundant, the integration of school assets is sufficient ammunition.
Profit forecast and valuation: the company has abundant orders and lays a high growth in decoration revenue in the next two years; the double suppression of academic loss and goodwill is expected to eliminate and reverse the loss. Assuming that Chengdu Vocational College and Guangzhou Foreign Affairs College merge in 2018, we expect the net profit from 2017 to 2019 to be 1.38,2.76 and 302 million yuan, the corresponding EPS is 0.11,0.22,0.24 yuan, and the corresponding share price PE is 38.8,19.32,17.69 times. Give the company a valuation of 30 times in 2018, corresponding to the target price of 6.66 yuan per share. Corresponding to the current stock price is still 55%. There is room for growth.
Risk hints: the market of architectural decoration industry is depressed, the integration of educational mergers and acquisitions is not up to expectations, and the risk of impairment of goodwill.