Events:

Recently, the company released its 2018 semi-annual report. During the reporting period, the company achieved operating income of 653 million yuan, an increase of 158.30% over the same period last year; net profit of 178 million yuan, an increase of 166.56% over the same period last year; and basic earnings per share of 0.58 yuan per share, an increase of 160.10% over the same period last year. The company's profit distribution plan for the 2018 half-year is to distribute a cash dividend of 1 yuan (including tax) for every 10 shares, with a dividend amount of 34.48 million yuan, accounting for 19.37% of the net profit returned to the parent.

Comments:

The demand for landscape lighting is blowout, and the company's revenue is growing rapidly.

The company's income is mainly composed of construction business and design business. During the reporting period, the business income of the engineering construction sector of the company was 618 million yuan, an increase of 145.86% over the same period last year, accounting for 94.65% of the total business income (- 4.79pct).

From a quarterly point of view, the company Q2 achieved operating income of 500 million yuan, an increase of 215.24% over the same period last year, and the net profit belonging to the owner of the parent company was 144 million yuan, an increase of 208.39% over the same period last year. There are three main reasons for the explosive growth of revenue and profits: first, the landscape demand blowout; second, the Shenzhen light show commemorating the 40th anniversary of reform and opening up won the bid in the reporting period entered the construction peak; third, the company has completed its fixed growth, and sufficient funds are conducive to prying more business.

The company estimates that the cumulative net profit of Mingrun in the first three quarters will be 24317525.17 million yuan, an increase of 111.45% 144.50% over the same period last year, of which the net profit from July to September is 6500-80 million yuan. the year-on-year growth rate was 28.27%, 57.87%, and Q3 growth slowed down mainly due to the basic completion of the Shenzhen project.

The gross profit margin has declined, the expense rate has dropped sharply during the period, and the cash outflow is basically the same as last year.

During the reporting period, the company's comprehensive gross profit margin was 51.1%, down 3.78% from the same period last year, of which the gross profit margin of construction business was 50.15%, down 5% from the same period last year. We judge that the fluctuation of gross profit margin is mainly due to increased competition and rising prices of raw materials.

The company has good cost control ability. During the reporting period, the expense rate during the company period was 13.85%, down 7.76 percentage points from the same period last year. Among them, the sales expense rate decreased by 3.93%; the management expense rate decreased by 5.12%; the financial expense rate increased by 1.28%. The sharp decline in the cost rate was mainly due to the rapid growth of income and the relative rigidity of expenses, reflecting the scale effect. The net cash flow generated by operating activities is-124 million yuan, which is basically the same as that of-112 million yuan in the same period last year. Considering the company's obvious business expansion this year, we believe that it has significantly strengthened cash flow management in the reporting period.

Endogenous epitaxial two-wheel drive to enhance cross-regional management capacity

During the reporting period, the company used its own capital of 247.5 million yuan to acquire 55% stake in Yongqi Lighting. The company also uses its own funds to invest a total of 11.1 million yuan through equity transfer and capital increase, and obtains a 30% stake in brilliant Mingzhou. The impact of the two transactions on the company: 1, help the company to achieve the national layout of "night travel economy", and further consolidate the company's position in the industry. 2. It is conducive to the comprehensive and coordinated development of Mingjiahui in the field of lighting engineering, and the company can effectively combine the excellent professional design ability of Yongqi Lighting to further improve the professional design level of the company.

In terms of endogenous growth, the company has 7 holding subsidiaries, 1 shareholding subsidiary and 16 branches throughout the country to carry out national business. Through years of market development, experience accumulation, management model exploration and personnel training, the company has initially established a business network covering the whole country and achieved cross-regional management capacity. In addition, during the reporting period, the company completed the fixed increase work and raised 870 million of funds, which fully ensured the operating funds for the follow-up business of the company.

Give a "buy" rating

We estimate that from 2018 to 2020, the company's operating income will be 1.105 billion yuan, 1.455 billion yuan and 1.905 billion yuan respectively, an increase of 62.1%, 31.6% and 30.9% respectively over the same period last year, and the net profit will be 332 million yuan, 457 million yuan and 611 million yuan respectively, up 91.0%, 37.7% and 33.7% respectively over the same period last year. EPS is 0.96 yuan per share, 1.32 yuan per share and 1.77 yuan per share, respectively, and the corresponding PE is 20max 14max 11x; the landscape lighting market is currently in a blowout period, and the company, as the only listed engineering company in the industry, is expected to achieve rapid growth with the help of the market outbreak, giving it a "buy" rating.

Risk hint

Infrastructure investment continues to decline sharply

The risk of a sharp rise in the price of raw materials

The risk that business expansion does not live up to expectations.