Brief comment on performance
The company realized revenue / return net profit of 35.89 billion in 2017, an increase of 16.99% and 69.97% respectively, which was lower than our expectation (440.34 million). The company plans to pay a cash dividend of 0.40 yuan (including tax) for every 10 shares.
Business analysis
Construction real estate business significantly improved, sufficient money + low debt ratio good assets. 1) the company realized revenue / return net profit of 3.59 billion yuan in 2017, an increase of 17% and 70% respectively, gross profit / net profit of 13% and 4% respectively, an increase of 1pct/2pct over the same period last year and an increase of 5% in the period fee. The reduction of 1pct compared with the same period last year is mainly due to the reduction of 1pct. 2) from the perspective of sub-business, the main business project construction revenue / gross profit is RMB 320.41 billion, with an increase of 14.3%, 16.6% and 14%, respectively, an increase of 0.3pct; real estate sales revenue / gross profit is RMB 3.2 million and gross profit is 8.8%, respectively, and the real estate business is significantly improved by increasing 15.8pct in the same period. 3) the net cash flow generated by the company's operating activities in 2017 was 170 million yuan, much higher than the industry average; the net investment cash flow reached 2.6 billion yuan, which is a subscription 1.8 billion trust plan. 4) the company has a monetary capital of 2 billion yuan on hand, with an asset-liability ratio of only 54.7%, which is much lower than that of Longyuan Construction (82.65% in Q3 2017) and Hongrun Construction (76.8%). Assuming an asset-liability ratio of 80%, the company can raise 14 billion yuan, superimposed cash on hand, and the scale of PPP can reach 80 billion yuan based on 20% leverage.
The high order increases and stabilizes the leading position of private enterprises in the Yangtze River Delta region, and the continuous increase of the chairman shows his ambition. 1) in 2017, the company's revenue in East China / Central China / Southwest China reached 32.7 million, with an increase of 13.9%, 386% and 30.5%, with remarkable results in ploughing East China. 2) the company signed 7.21 billion new orders in 2017 and 21.4 billion projects under construction in 2017; plus 3.8 billion new orders signed by Q1 in 2018, and new orders may reach a new high in 2018, which is expected to be 100-13 billion; at present, the cumulative volume of on-hand orders exceeds 25 billion, and the order-to-revenue ratio is more than 6 times. The company is expected to usher in sustained rapid revenue growth. 3) after the spouse of the chairman increased his or her holdings by 110 million yuan in January 2018, the chairman plans to increase his holdings by no less than 300 million shares in April. The continuous increase of the chairman's holdings demonstrates his ambition for future development, and the margin of stock price safety is high.
Investment suggestion
Considering that the company's performance was lower than expected, we downgraded it to overweight and downgraded its profit forecast. It is estimated that the company's EPS in 2018 and 2019 will be 0.25max 0.38 yuan, and the target price will be 5 yuan, corresponding to 2018 / 2019 PE valuation 2013 times.
Risk hints: macroeconomic fluctuation risk, lower-than-expected order execution risk, inventory price decline risk.
