Company profile: Pudong Construction is the infrastructure investment and construction platform of Pudong Development Group. Business layout is based on Pudong, covering Shanghai, radiating the Yangtze River Delta. Mainly engaged in highway, municipal and other infrastructure and housing construction project general contracting and project investment and financing.
Plenty of ammunition will benefit from the opportunity period of regional construction: the expansion of construction enterprises is subject to the asset-liability ratio.
The asset-liability ratio of Pudong construction as of the end of 18 years is only 49%, which is much lower than that of similar construction enterprises. The cash size of the company is about 5.7 billion yuan, and the interest-bearing liability is only 650 million yuan, which is equal to its market capitalization. With the regional integration of the Yangtze River Delta and the gradual promotion of the construction of Shanghai Free Trade Zone, the low asset-liability ratio and abundant cash make it have enough financial space to support the expansion of scale and profits.
Scarce project management + investment and financing enterprises: from the financial data, it is difficult to classify companies as construction enterprises or architectural design enterprises, but the current market scarce project management + investment and financing enterprises. In 2017, the per capita income was about 6.5 million yuan and the per capita profit was 740000 yuan, which was much higher than that of similar construction or design enterprises, and its per capita salary was about 440000 yuan, which was also higher than the average level of architectural design enterprises. Historically, Pudong Construction has earned excess project returns through its project management capabilities (with a comprehensive gross profit margin of more than 40% in 12-13 years). High per capita income, high per capita profit and high per capita salary are the excellent embodiment of the elitism of its team. At the same time, the proportion of the company's net investment income in its profits is also much higher than that of similar construction enterprises, mainly because the company has made a lot of profits in infrastructure investment projects.
The impact of BT repurchase investment income on the income statement is weakened: the company's historical investment net income mainly comes from BT project repurchase profit. With the gradual expiration of the buyback of BT projects, its profit contribution gradually decreases.
18H1, the net investment income of the company is 120 million yuan, of which only 12 million yuan comes from BT income, and the rest is mainly structural deposit return and joint venture investment income. We judge that the impact of BT project repurchase on the company's income statement has been greatly weakened, and the investment income will remain stable in the future.
Rich in ammunition, benefiting from the integration of the Yangtze River Delta and the construction of a free trade zone
With the integration of the Yangtze River Delta and the continuous promotion of the construction of Shanghai Free Trade New area, the demand for regional construction will be gradually released. Pudong construction has a low asset-liability ratio and abundant cash on hand, which will usher in a period of historical opportunity. It is estimated that the EPS of the company in 2018-20 is 0.47,0.53 and 0.60 yuan respectively. The company's ROE level is low at this stage, mainly because its cash is not its means of production. With the increase of high-quality projects in the future, ROE is expected to pick up. Pudong construction history PB valuation center is 1.7x, given 18-year PB1.2x, corresponding to the target price of 7.1yuan. For the first time, coverage gives a "buy" rating.
Risk hint: regional investment is not as expected, reinvestment risk
