This report is read as follows:
Henan capital construction space is large, the central transfer payment is high, the company is the provincial infrastructure design leader and sufficient technology / talent reserve, strong profitability, regional / industry expansion, infrastructure design is the first to benefit under the background of infrastructure rebound.
Main points of investment:
Increase the rating. Henan base construction design leader benefited from the rapid growth of the province, infrastructure rebound design first benefited. It is predicted that the company's EPS in 2018-20 will be 2.48max 3.39pm 4.33 yuan, with a growth rate of 40pm 37pm 28%. It will give the company 20 times PE in 2018, with a target price of 49.6yuan (40% space). For the first time, the company will be given an overweight rating.
High net profit growth + abundant capital + low debt + strong profit, complete Class A qualification / high market share. 1) the company's net profit growth rate in the first three quarters of 2018 is 45% (the second highest in infrastructure design) / 74% in the current currency ratio (the first highest) / 35% in the debt ratio (the second lowest) / 48pm (the second highest) / zero pledge. The fundamentals are excellent. 2) strong competitive advantage: ① qualifications are complete (including 26 qualifications of Grade A within 6 core business areas) ② technology / talent reserve is sufficient (7 engineering and technical R & D centers / 4 national and provincial survey masters) ③ province highway / first-class highway design market share is high ④ equity structure is stable (35% of the chairman's shareholding platform + 15% of the transportation department service center) 3) the position of the fund is only 0.01%.
Henan capital construction space + central transfer payment is high, regional industry expansion and industrial chain extension contribute to a wide space for growth. 1) the proportion of the company's business in the province is about 80%. Strengthening the localized layout (setting up 6 regional operation centers outside the province) and actively expanding overseas will benefit Belt and Road Initiative; 2) the proportion of highways will be about 70% (design caliber), and actively expanding municipal / rail traffic will benefit the quality improvement and urbanization construction of Henan cities; 3) Highway reconstruction and expansion / maintenance will expand the industrial chain and benefit BIM to improve efficiency. 4) Henan has outstanding geographical advantages and there is expected to be a 59% gap in highway investment during the 13th five-year Plan. The current infrastructure growth rate has bottomed out and rebounded / the central and western regions have achieved 117.3 billion of the 1.66 trillion central 2019 transfer payments announced by the Ministry of Finance in November, and the debt balance is better than GDP and other indicators, laying a solid foundation for follow-up infrastructure construction.
Catalyst: acceleration of Henan infrastructure investment, better-than-expected business coordination, effective out-of-province / overseas expansion, etc.
Core risks: infrastructure growth is lower than expected, non-provincial and overseas market expansion is not as expected, etc.