Events:
The company released its three-quarter 2018 report, with revenue of 2.624 billion yuan in the first three quarters of 2018, an increase of 4.14% over the same period last year, and net profit of 387 million yuan, up 5.45% over the same period last year.
Comments:
The gross profit margin has increased, the operating cash flow has increased significantly, and the cash withdrawal has accelerated:
In the first three quarters of 2018, the company achieved a gross profit margin of 14.86% (2017Q3 14.55%), up 0.31% from a year earlier; a net profit margin of 32.33% (2017Q3 was 33.27%), down 0.94% from a year earlier; and an expense rate of 15.47% (2017Q3 was 14.27%), up 1.20% from a year earlier, mainly due to increased capital demand and increased financial costs due to the country's financial deleveraging.
The company's net operating cash flow in the first three quarters was 50 million yuan, compared with-441 million yuan in the same period in 2017, a substantial increase of 111.30% over the same period last year, mainly due to the increase in customer repayment efforts during the reporting period.
Sufficient orders on hand to ensure sustained growth:
The company has sufficient orders on hand. Saishi Garden, a wholly-owned subsidiary of the company's garden sector, has signed a newly signed project order of 685 million yuan in the third quarter, and has won the bid and unsigned order of 65 million yuan. by the end of the third quarter, Saishi Garden had signed an unfinished order of 7.041 billion yuan, including 6.951 billion yuan for engineering orders and 90 million yuan for design orders. Corresponding to the revenue of the garden sector in 2017, the revenue of the garden sector is 2.626 billion yuan, and the guarantee ratio of order income is about 2.7 times, providing a guarantee for the continuous growth of the follow-up performance.
Operating steadily under deleveraging, performance below expectations or affected by PPP regulation:
Since the acquisition of Saishi Garden, the company has been actively involved in ecological garden business and ecological environmental protection business, and is committed to becoming the leading comprehensive developer of "seedling-design-construction-operation" integrated industry chain in China. At the same time, under the background of the national implementation of a series of regulatory regulation and financial deleveraging of PPP, the company carefully considers project risks and selects and implements high-quality and low-risk projects, which affects the company's operation tends to be sound and its performance growth slows down.
Introduce Weifang City Investment, the background shareholder of state-owned assets, to promote the sustainable development of the company:
Zhang Lei, the company's controlling shareholder, signed the "share transfer Agreement" with Weifang City Investment on September 05, 2018, transferring its 145307251 unlimited tradable shares (accounting for 10% of the company's total shares) to Weifang City Investment by way of agreement transfer, with a transfer price of 6.201 yuan per share. The introduction of shareholders with the background of state-owned assets will help to optimize the company's ownership structure, improve the company's financing capacity, ease the financial pressure and promote the sustainable development of the business.
Financial forecasts and valuations:
It is estimated that the company's net profit from 2018 to 2020 will be reduced from 879, 12.30, 1659 million yuan to 743, 932 million yuan, an increase of 10.3%, 10.5%, 25.5%, corresponding to EPS 0.46, 0.51, and 0.64 yuan, and the current stock price corresponds to 11.9, 10.8, and 8.6 times of PE in 2018-2020. The company has sufficient orders on hand, introducing state-owned assets to ensure sustainable development and maintaining a "highly recommended" rating.
Risk tips: PPP business model risk, extension is not up to expectations, payback risk and so on.