This report is read as follows:
Financing improvement + policy support will promote infrastructure to continue the upward trend, the company will benefit from the rebound of infrastructure and the upsurge of highway / municipal construction in Henan province, and the whole industry chain will be firmly promoted, which is optimistic about the high growth trend of future performance.
Main points of investment:
Maintain and increase holdings. As a regional leader, the company will benefit from the rebound in infrastructure and the upsurge in infrastructure / municipal construction in the province. We maintain the forecast that the company's annual EPS in 2018-19-20 will be 2.21pm 3.02pm, with a growth rate of 31pm, with a growth rate of 31pm. The target price will be RMB49.6.00, corresponding to 16.4 PE in 2019, which will increase its holdings.
Optimistic about high growth logic one: infrastructure will continue the upward trend, the company for Henan design leader will benefit. 1) according to the 21st Century Economic Daily, the bond issuance restrictions of local financing vehicles have been relaxed, which is good for the promotion of infrastructure; 2) the stabilization of financing and policy support promote the rebound of infrastructure. We predict that the domestic highway / railway / municipal (rail traffic + corridor) investment in the next 2 years will be about 7.4-11.8 trillion; the company will strengthen the localized layout (20% of the business outside the province will be raised to more than 40% at present) and benefit from Xiongan construction. 2) Henan policy catalysis + infrastructure / municipal space is higher, and the company is the leader of regional design. Advantages such as strong profitability / low debt / 0 pledge and qualification / technology / cohesion / per capita net creation will benefit: ① province plans to issue 27.4 billion yuan of local bonds for transportation and other projects ② province has a low high-speed density / at the end of the 13th five-year Plan, there is a gap of 80% for high-speed 7800km, and the density of roads and bridges in ③ province is larger and more catalytic than that of first-tier provinces and cities.
The second logic of high growth is that Henan has stronger finance and lower debt to lay the financial foundation for infrastructure construction. 1) Henan is financially strong: the total amount of GDP ranks 5th / 2018, the GDP growth rate is 7.6% higher than the national 6.6% + general public budget revenue growth rate of 10.5% higher than the national 6.2%) Henan debt level is low (2017 local debt ratio GDP12.5% 29 + debt ratio 163% 23), and the central 2019 transfer payment won the second place of 118.4 billion, the first balanced payment of 97.3 billion yuan.
Optimistic about the logic of high growth: solid progress in the layout of the whole industry chain. 1) the acquisition of the Provincial Coal Institute to enhance the strength of underground rail transportation, and all the targets for 2019 will show increased performance (2019-20 commitment to deduct the non-net profit ≥ 0.32 billion); 2) the central government will not default on private enterprises' accounts + support the development of private enterprises, and we expect the company's cash flow to improve. 3) the company's 20-year forecast of PE in 2019 is only 12.0 and obviously underestimated, and the increase of only 16% so far in 2019 is lower than the 28% stagflation of Shanghai and Shenzhen 300.
Core risks: accounts receivable risk, order execution is lower than expected, etc.