The company is operating steadily and its future performance is expected to be:
The company focuses on the decorative design and engineering construction of high-end star hotels and has an outstanding competitive advantage in the high-end public building decoration industry. In the first three quarters of 2018, the company achieved operating income of 1.563 billion yuan, an increase of 17.86% over the same period last year, and realized a net profit of 79 million yuan, an increase of 30.33% over the same period last year. The overall net profit growth of the company was better than that of revenue growth, thanks to the rapid growth of the design business with higher net interest rates. The net cash flow generated by the company's operating activities in the first three quarters was-36 million yuan, an increase of 74.07% over the same period last year. The improvement of operating cash flow mainly benefited from the strengthening of the company's payback management. Benefiting from the substantial increase in the company's design business orders, the future performance is expected to continue to improve. It is expected that the net profit of home return in 2018 will change by 40%, ranging from 108 million yuan to 151 million yuan.
The total quantity of the order is abundant and the structure is reasonable:
The company signed 2.268 billion yuan of new orders in the first three quarters of 2018, basically the same as the same period in 2017, of which the construction business was 1.476 billion yuan, down 25.59% from the same period last year. The design business is 792 million yuan, an increase of 177.76% over the same period last year. The eye-catching data of the design business reflects that the company's international design level has been fully affirmed by the market, and the rapid growth of orders for decorative design with high gross profit margin will contribute to the improvement of the company's overall gross profit margin in the future. In addition, by the third quarter of 2018, a total of 4.093 billion yuan of unfinished orders have been signed, including 2.486 billion yuan for construction business and 1.607 billion yuan for design business. Sufficient orders on hand ensure the stable growth of the company's future performance.
The hotel design strength is leading, the core competitiveness is outstanding:
The company's high-end hotel design level has been recognized by international hotel management groups and international counterparts, with outstanding advantages. The design ability of the company has been recognized at home and abroad, and has won many awards in the design selection and ranking at home and abroad. It ranks third in the world in the "Top 100 list of Global Hotel Design in 2013" by Interior Design, an authoritative professional interior design magazine in the United States. The continuous expansion and strength of the company's design business in the past two years reflects the continuous improvement of the company's core competitiveness. The revenue share of its design business rose from 15% in 2016 to 18% in mid-2018, ranking first in the same industry. The gross profit margin of the design business reached 39.19% in the first half of 2018, leading other comparable listed companies in the same industry in China, and has an absolute competitive advantage.
We have made great efforts to promote the EPC model and actively expand our integrated business:
The company has positioned the EPC model as the main mode for the enterprise to undertake business in the future. at present, it has completed a number of high-end star hotel projects through the EPC model, and successfully delivered to the owners and wine management companies. The successful promotion and application of the EPC model is due to the perfect connection between the design and construction of the company's design brand CCD and the engineering brand ATG. In 2017, the operating income of the EPC project reached 879 million yuan, accounting for 48.16% of the company's total revenue. In addition, the company makes use of architectural decoration design, engineering construction and supporting services with the characteristics of brand accumulation, starting from high-end star hotel decoration, and gradually entering other high-end public building decoration fields, such as high-end office buildings, high-quality residential buildings, luxury clubs and so on. In particular, the high-quality housing business has developed rapidly, undertaking a number of representative luxury projects in the past two years, with revenue of about 58.61 million yuan in 2017, an increase of 38.39 percent over the same period last year.
Financial forecasts and valuations:
From 2018 to 2020, we estimate that the company will achieve an operating income of 2.180 million yuan, an increase of 19.4%, 14.2%, and 1.72 million yuan, respectively, a year-on-year increase of 27.5%, 24.8%, 22.5%, and a corresponding EPS of 0.76, 0.95, 0.95, 1.17 yuan. The current stock price corresponds to the 2018-2020 PE of 23.6, 18.9, and 15.4 times. Considering the company's leading design strength, the EPC model develops smoothly and maintains the "recommended" rating.
Risk tips: real estate cyclical fluctuations, payback risk.
