This report is read as follows:
Century Ruier is the leader of China Railway Safety Monitoring and Rail Transit PIS. As the new subway line will gradually enter the operation period, the future PIS business revenue growth will exceed market expectations, and the performance inflection point has come.
Main points of investment:
Cover for the first time and give an overweight rating. It is estimated that the EPS from 2018 to 2020 will be 0.20, 0.17 and 0.24 yuan respectively. Considering that the market share of each business of the company is the first in the industry, a certain valuation premium will be given. According to the calculation of 0.65 times PEG in 2019, the target price will be 6.80 yuan.
The traditional railway safety monitoring business will benefit from the revival of railway infrastructure. Looking forward to 2019, under the premise of steady growth, we expect a substantial increase in railway investment. The company's railway safety monitoring business income is positively related to the newly built railway mileage, but there is a certain lag, because safety monitoring belongs to the later project in the process of railway construction, which will lay the foundation for the company's performance growth in the next few years.
PIS business will significantly exceed expectations. According to the data of the Urban Rail Transit Association, we can see that subway construction entered a peak period in 2015, with a new subway construction mileage of 1135 km in 2016, a growth rate of 78.46%. It usually takes about three years from construction to operation, so there will be a substantial increase in Beihai communications orders in 2018-2019.
The market share of station operation and maintenance is high, and a stable cash flow will be formed in the future. The company is the only professional provider of domestic station customer service operation and maintenance management services, and is basically in a monopoly position. The company once had a market share of 90%. At present, it participates in the operation and maintenance of more than 400 high-speed railway stations, with a market share of about 70%. In the future, this business will bring stable cash flow to the company, while the introduction of new products for station operation and maintenance is expected to bring revenue increment.
Risk hint: the risk that the investment in railway infrastructure is less than expected and the risk of intensified competition in the industry
