The integration of the company's industrial chain has been steadily promoted, and the company's revenue growth has been steadily improved.
As a large professional architectural decoration service provider, the company mainly provides decoration design and construction services to real estate companies, government departments, large enterprises, high-end hotels and other institutions. In March 2017, the company was successfully listed on the gem. Under the background of the gradual increase of industry concentration, successful listing is of great significance for the company to consolidate its position as the first echelon in the industry. At present, the company has complete qualifications, and at the beginning of 2018, through acquisition and other means, it has obtained qualifications such as the first level of general contracting for construction and the first level of general contracting for municipal projects, enabling the company to move forward from an integrated architectural decoration service provider to a general construction contractor.
The company's revenue in the first half of 2018 was 1.099 billion, an increase of 29.23%, an increase over 2017, and revenue continued to grow at a high level in the first three quarters of 2018. The residential fine decoration business in the first half of 2018 increased by 73.13% year-on-year to 486 million. The return net profit of the company in the same period was 57 million, an increase of 48.32%. In terms of operating cash flow, compared with companies in the same industry, the company is in the upper reaches of the industry in terms of cash-to-cash ratio and cash flow of operating activities, and the cash on hand is considerable at the initial stage of listing, and the company is expected to maintain steady growth in the medium term.
At the initial stage of industrial chain integration, the success of listing and the improvement of industry concentration are expected to promote the steady growth of the company's public clothes.
At present, the company is in the early stage of listing, and gradually strengthens the integration of the upstream and downstream of the industrial chain by investing in parts factory projects and design centers and other projects. at the same time, the company acquired a 66% stake in Fujian Mindong Construction Engineering in the first half of 2018 to further improve the type of qualification of the company, promoting the company to move forward from an integrated architectural decoration service provider to a construction general contractor. And with Mindong Construction Engineering to form business channels and customer resources to complement each other, so as to enhance the company's business development ability. We believe that in the initial stage of resource integration in the upper and lower reaches of the industrial chain, the company is expected to achieve steady growth in the public clothing business, superimposing the factors of the continuation of the trend of industry concentration, and the company is also expected to benefit from it.
Residential fine decoration will become a strong point of future growth, and strengthen cooperation with high-quality developers to improve the quality of future profits.
The proportion of residential fine decoration business in the company's revenue structure has increased significantly in recent years, from 11.4% in 2014 to 44.3% in the first half of 2018. Through the strategic adjustment of the business structure, the company actively seeks cooperation with high-quality real estate developers. Or the company will fully benefit from the dividend of the increased proportion of residential decoration. Different from the public outfit projects, developers have certain standards for residential hardcover design, materials and furniture, and the project has better replication and is more likely to produce economies of scale. In addition, through actively embracing the major developers, the company has gradually formed a strong competitive advantage in the high-end hardcover field, and the hardcover business has a certain degree of continuity, which is a relatively stable supplement to the public wear business.
Investment suggestion
We believe that with the acceleration of the integration of resources in the upper and lower reaches of the industrial chain and the gradual promotion of residential fine decoration business, the company is expected to usher in new development opportunities at the initial stage of listing. Cover for the first time, giving a "buy" rating. It is predicted that from 2018 to 2020, the EPS will be 0.51,0.70,0.91 yuan per share respectively, and the net profit growth rate will be 34.33%, 37.97% and 29.05% respectively, and the corresponding PE will be 19.16,13.89,10.76 times respectively. Give the company 24.135 times the 2018 EPS corresponding to the PE forecast, and multiply it with the 2018 forecast EPS to get the target price of 12.31 yuan per share.
Risk hint: the company's business payback is lower than expected, the growth rate of investment in China is accelerating and the financing environment of the industry is tightening more than expected.