Events:
The company released its 2018 semi-annual report on August 27, 2018.2018. In the first half of 2018, the company realized operating income of 1.139 billion yuan, an increase of 91.11% over the same period last year; net profit of 42 million yuan, an increase of 214.83% over the same period last year; and net profit of 29 million yuan, an increase of 128.07% over the same period last year. Of this total, Q2 realized operating income of 540 million, an increase of 27.32%, and a net profit of 20 million, a decrease of 20.42%.
Viewpoint:
1. The capital construction leader of the western high-potential provinces, the listing accelerates the landing of the strategy of "four businesses and four industries", and makes a magnificent transformation from a road and bridge construction enterprise to an infrastructure integrated service provider.
Regional infrastructure leader, rich performance, significant technical barriers. Since its establishment in 1993, the company has formed a perfect road and bridge construction industry chain in Qinghai market, which is the most qualified and highest-grade road and bridge construction enterprise in the province, and has four first-class general contracting qualifications in the fields of highway, municipal, water conservancy and construction. Bridge, pavement, roadbed and tunnel four professional contracting first-class qualifications, a total of about 3000 kilometers of roads are under construction or completed, with an average elevation of more than 3000 meters above sea level. Strong engineering experience in permafrost, saline soil and other regional projects.
Through listing to realize the magnificent transformation from a road and bridge construction enterprise to an infrastructure integrated service provider. Since entering the capital market in 2016.9, the company has given full play to its advantages in listing, and has successively controlled Longdi Electric Power, Guizhou Water Conservancy and Golden Sunshine Construction through equity mergers and acquisitions, accelerating the landing of the strategy of "four businesses and four industries". The current business covers highway, railway, municipal, housing, water conservancy, electric power, energy and other fields, forming industrial synergy and improving the overall competitiveness of the whole field and the whole industry chain in the field of infrastructure construction. 2016.11 Zhengping Investment, a wholly-owned subsidiary, is responsible for leading investment projects in the field of infrastructure, so as to further expand the general contracting business of engineering construction, and obtain other comprehensive benefits except engineering construction and facility manufacturing in a variety of investment construction modes.
During the reporting period, the company plans to acquire Kesheng Environmental Protection to enter the high potential environmental engineering market, further expand business coverage and enhance synergy. The underlying assets are mainly engaged in environmental engineering business such as water treatment and environmental restoration, and have the special Class An engineering design qualification for environmental engineering (water pollution prevention and control project). It is "Nanjing recognized Enterprise Technology Center" and "Jiangsu Province recognized Enterprise Technology Center". The relevant R & D capabilities are among the leading in China. The company examined and passed the relevant motion on issuing shares and paying cash to purchase assets and raise supporting funds in 2018.5.According to the latest announcement of 8.24, the company and relevant intermediaries are communicating and negotiating with the other parties to promote the acquisition.
two。 The growth rate of performance is in line with expectations, and will benefit from business synergy and large single drive to maintain rapid growth.
Performance as expected to usher in an inflection point, high-speed growth. 2018H1's revenue / homecoming was 1.139 billion / 42 million, an increase of 91% and 215% respectively, which was a positive and significant increase compared with-32% of 2017H1 and 42% of-30% for the whole year of 2017. Among them, Q1 revenue / return to the mother increased by 248%, and the overall performance was boosted by 24.5% of the total. We judge that the main reason for the rapid growth of performance is that 2017 of the projects in hand are understarted, the income is declining, and some projects are delayed until the start of 2018Q1.
Business synergy appears, the abundance of orders will maintain rapid growth. During the reporting period, the amount of new orders in the company's construction sector increased by 8.15 billion, an increase of 34%, accounting for 7.2times of the current income, including the Sanmenxia-Yuzhou section of the Sanyang Railway (the total investment was 10 billion, and the winning part of the company was about 6.86 billion), and the 580 million Chishui Bing'an Reservoir EPC project.
3. The sharp reduction in asset impairment losses led to an increase in overall profitability, and a significant improvement in operating cash flow as a result of the rise and fall in the ratio of receipt and payment to cash flow.
The change in the scope of the merger led to a simultaneous decline in fees during the period of gross profit margin, and a significant reduction in asset impairment losses led to an increase in overall profitability. The gross profit margin during the reporting period was 10.70%, which was 1.9 / 2.8 pct lower than that of 2017H1/2017 for the whole year. The sales / management / financial rates are 0.34%, 3.85% and 4.12% respectively, which is 0 / 0.3 / 0.2 pct lower than that of the same period last year, mainly due to the change in the scope of the merger. The total period rate is 8.31%, which is 0.6 / 0.03 pct lower than that of 2017H1/2017 for the whole year. The loss of asset impairment-45.3 million is much lower than that of 4 million in the same period last year, mainly due to the fact that all the projects undertaken in the past three years are government-invested or authorized projects, and the risk of default is small. Therefore, the company does not have margin bad debt losses, and the large gap in the amount of provision for bad debts is not in line with the actual financial situation of the company, so the change in the method of provision for bad debts has been implemented since 2018.1.1, greatly reducing the impairment loss. As a result, the net profit rate of 4.87% is 2 / 1.6 pct higher than that of 2017H1/2017 for the whole year, and the overall profit level is significantly higher.
The ratio of receipt, payment and cash has changed obviously, and the operating cash flow has improved significantly. During the reporting period, the cash-to-cash ratio of 90.5% was 56.6 / 13.2 pct higher than that of 2017H1/2017, and the cash-to-cash ratio was 120.8% higher than that of 2017H1/2017-26.5 / 5.5 pct, significantly lower than the same period last year. The net cash flow of operation and investment was-130 million /-60 million respectively, which was lower than that of-790 million /-130 million in the same period last year, while the net cash flow of fund-raising was 140 million little changed from 160 million in the same period last year.
Conclusion:
During the reporting period, the company's revenue / return to the mother ushered in an inflection point with an increase of 91% and 215% respectively, with a rapid growth rate in line with expectations. The change in the scope of the merger led to a simultaneous decline in fees during the period of gross profit margin, and a significant reduction in asset impairment losses led to an increase in overall profitability. The change in the ratio of receipt, payment and cash has obviously led to a significant improvement in cash flow.
We believe that the company takes advantage of listing advantages to actively acquire and promote the "four businesses and four industries" strategy, the magnificent transformation from a road and bridge construction enterprise to an integrated infrastructure service provider, and the effect of business synergy enhancement has been reflected in business growth. At present, there are plenty of orders on hand, and the signing of nearly 10 billion large orders has greatly boosted business confidence.
It is estimated that the company's operating income from 2018 to 2020 is 2.605 billion yuan, 3.874 billion yuan and 4.84 billion yuan respectively, and the earnings per share are 0.34,0.41 and 0.49 yuan respectively, corresponding to PE 25.3X, 20.8X and 17.5X respectively.
Risk hints: macroeconomic cycle fluctuation risk, raw material price fluctuation risk, performance seasonal fluctuation risk, force majeure risk