This report is read as follows:
18H1 EPC project revenue recognition progress is accelerated, on-hand orders are sufficient to ensure sustained growth, optimistic about high-end power generation equipment and agricultural industrial park two-wheel drive.
Main points of investment:
Conclusion: 18H1 realized revenue and return net profit of 1.05 billion respectively, an increase of 65.7% and 55.4% over the same period last year, which is in line with expectations. The progress of EPC revenue recognition of 18H1 company is accelerated, and the orders on hand are sufficient to ensure sustained growth. We are optimistic about high-end power generation equipment and two-wheel drive in the agricultural industrial park. In 2018-20, the EPS forecast is 0.45, 0.73 and 0.93 yuan respectively, maintaining the target price of 15 yuan, and increasing holdings.
The progress of revenue recognition of EPC project has been accelerated, and on-hand orders are sufficient to ensure sustained growth. ① sub-business point of view, benefiting from the rapid development of EPC, power island core steam turbine revenue 613 million (year-on-year + 118.4%), traditional blower recovery, income 225 million (year-on-year + 40%); ② from the revenue recognition progress, 18H1 recognized EPC revenue 590 million (year-on-year + 127%), the progress is greatly accelerated ③ from the point of view of on-hand orders, 18H1 newly signed EPC orders 530 million (signed contracts), at the end of the period in hand EPC orders 4.92 billion, most of which are 17H2 new intention orders, another EMC orders are still 710 million (unexecuted), followed by a high probability of revenue recognition, to ensure continued growth in performance.
The cost side temporarily erodes gross profit and is optimistic about high-end power generation equipment and two-wheel drive in the agricultural industrial park. ① due to the increase in the price of raw materials and other factors, the comprehensive gross profit margin of 18H1 is 23.5% (- 5.1pct), of which the gross profit margin of blower and steam turbine is 13.4% (year-5.0pct) / 26.8% (- 7.3pct) respectively. ② due to environmental inspection and commissioning improvement and other factors, 18H1 Gaoyou Lin source has not reached full production, and the equipment improvement investment is large, 18H1 has not yet realized the income. In the long run, ③ has great potential for waste heat recovery in China, and the company has excellent qualifications in the field of energy EPC. After the acquisition of Shanghai Transport capacity, the company will increase the development of overseas markets; in addition, the company will take Gaoyou Linyuan as the center, promote the agricultural industrial park model across the country and transform to an operator.
Catalyst: agricultural industrial park project landed.
Risk factors: the implementation of project orders is not up to expectations, and the promotion of biomass power generation projects is not as expected.