Main points of investment:
Performance growth slowed in the first three quarters, while Q3 performance declined compared with the same period last year. The company's revenue in the first three quarters of 2018 was 2.126 billion yuan, an increase of 10.12% over the same period last year, and its net profit was 193 million yuan, an increase of 11.37%. The net profit after deducting non-return was 185 million yuan, an increase of 7.26% over the same period last year. From a quarterly point of view, Q1, Q2 and Q3 revenue increased by 43.41%, 12.17% and-4.48% respectively compared with the same period last year. Q3 revenue decreased year-on-year. We believe that it is mainly due to the tightening of market financing in the third quarter and the slow progress of the project. Q1, Q2 and Q3 net profit increased by 48.61%, 22.80% and-9.63% respectively compared with the same period last year. For the whole of 2018, the company expects its return net profit to grow by 0-30%.
Gross profit margin is stable, rebates are slowing and cash flow is deteriorating. In the first three quarters, the company's gross profit margin remained relatively stable, slightly increasing 0.09 pct to 17.86%. During the period, the expense rate (excluding R & D expenses) increased by 0.56 pct to 6.01%, of which the management expense rate (excluding R & D expenses) slightly increased by 0.08 pct to 4.68%. Due to the increase in interest and handling expenses, the financial expense rate increased by 0.49 pct to 1.33%, and the net profit rate increased by 0.10 pct to 9.07%. In terms of cash flow, the net operating cash flow was-475 million yuan, an increase of 313 million yuan over the same period in 17 years. We believe that mainly because the payback slowed down obviously, the cash-to-cash ratio decreased by 23.28 pct to 44.78%, but the simultaneous cash-to-cash ratio decreased by 12.18 pct to 67.12%.
In addition, notes and accounts receivable increased by 136.93% and 29.50% respectively over the end of the previous year, and long-term receivables increased by 50.23% over the end of the previous year.
There are many BT/PPP projects, and the funds on hand are relatively sufficient to ensure the landing of the project. At the end of the third quarter, the parent company's long-term equity investment was 136 million yuan, long-term accounts receivable was 301 million yuan, consolidated statement long-term equity investment was 33 million yuan, long-term accounts receivable was 606 million yuan, and the increase in long-term receivables was mostly caused by the consolidation of BT/PPP project companies. The company further strengthens and expands in the new business direction, and focuses on selecting projects with good expectations of capital recovery, actively abandoning projects that occupy large funds and uncertainty about the availability of funds, and only keeps follow-up on high-quality large-scale projects (including EPC and PPP projects). In addition, the company will increase investment, mergers and acquisitions and strategic cooperation in the fields of ecology, environmental protection and tourism, so that investment enterprises and strategic partners can achieve complementary resources and common development with the company. In the first three quarters of 2018, the company signed 4.454 billion yuan in new orders and 6.808 billion yuan in-hand orders, which is 2.65 times the revenue in 2017. the orders are relatively sufficient. As of the end of 18Q3, the company has 446 million yuan of monetary funds on hand, mainly because the rights issue of 841 million yuan was completed in April, with sufficient funds on hand; in addition, the company is also expanding its funding sources in a variety of ways to ensure the landing of the project.
Profit forecast and rating. We estimate that the company's EPS for 18-19 years will be 0.57 yuan and 0.74 yuan respectively, the company has sufficient orders on hand, low debt ratio, large financing space, and rights issue funds are in place to effectively ensure the landing of the project; in addition, the proportion of PPP business has increased, superimposed epitaxial mergers and acquisitions, improved the industrial chain, given an 18-year price-to-earnings ratio of 14-15 times, a reasonable value range of 7.98-8.55 yuan, and maintained a "better than the market" rating.
Risk hint. Policy risk, payback risk, economic downturn risk.