Recently, the company issued an announcement that in order to speed up the layout of smart street lamp related industries and enhance the competitive advantage of smart street lamp market, the company signed the Strategic Cooperation Framework Agreement (hereinafter referred to as "Agreement") with Huatie Science and Technology on March 21, 2019. Comments are as follows:
The company has taken an important step in the field of intelligent street lamps, and the "one core and two wings" strategy is expected to steadily promote the company as a leader in the landscape lighting industry. After listing, the company will actively explore the development path of the industry, on the basis of lighting engineering as the core. In recent years, taking advantage of the wind night travel economic trend to develop night travel projects, and the future is expected to cut into the smart city construction through the wisdom street lamp. The signing of the agreement is an important step in the company's long-term strategic development plan of "one core and two wings". The agreement points out that both the company and Huatian Technology will integrate superior resources and jointly develop smart street lamp related industries, and Huatian Science and Technology will provide strong support for the company in terms of smart street lamp products. The gradual promotion of the company's intelligent street lamp business in the future is expected to make the company gradually change from the role of a traditional construction enterprise to an intelligent street lamp operator.
The company has made a prospect for the smart street lamp business in its prospectus in 2016, and put forward that the smart street lamp is an important part of the smart city construction. In addition, we think that it is expected to become the main entrance to the city big data in the future, such as the construction of a large number of micro base stations necessary for the promotion of the 5G network, and the smart street lamp can be used as one of the important carriers. In addition to 5G micro base stations, security, various environmental monitors and other ancillary equipment can consider the placement of smart street lamps, and the operational value of smart street lamps will continue to be excavated in the future.
The company's landscape lighting project orders are gradually tilted to first-and second-tier cities, and the payback situation may gradually improve the company's traditional landscape lighting engineering business or will continue to benefit from the prosperity of the industry. The 2018 Shanghai Summit in Qingdao and Futian in Shenzhen have left a deep impression on the brightening landscape display in areas such as Qingdao and Futian. In 2018, the company won the bid for Shenzhen, Qingdao and other regional projects, the order structure is gradually tilted to the first-and second-tier cities, and the better financial situation of the first-and second-tier cities is expected to improve the company's rebate quality. We believe that under the background of limited investment by local governments, landscape lighting projects with small investment and obvious results will become a better choice for all kinds of large-scale activities and to enhance the appearance of the city and increase the satisfaction of residents.
The company's asset-liability ratio has a good expansion ability, and the company's balance sheet has a good expansion ability to maintain a high growth rate in recent years. Benefiting from the fixed capital increase in 2018 (the fixed issue price is 19.66 yuan per share), the company's asset-liability ratio at the end of September 2018 was 46.36%, which was significantly lower than that at the beginning of the year. The company's 2018 performance KuaiBao showed that revenue grew by 96% and net profit by 88%, continuing the high growth rate in recent years. It is expected that with the initial payback of first-and second-tier urban projects gradually in place, the company's balance sheet will maintain a good expansion capacity.
Investment suggestion
The signing of this agreement is an important step in the company's long-term strategic development plan of "one core and two wings". The company is expected to increase the operational attributes of its own business by expanding the night excursion project and smart street lamp business. In the future, the cooperation with Wisdom Street Lamp leading enterprise Huadi Science and Technology, combined with the company's own government client resources, may enable the company to form a greater advantage in obtaining smart streetlight engineering projects. We are optimistic about the development of the company and maintain our "buy" rating. Due to the tightening of the financing environment for government projects in 2018, based on the company's performance KuaiBao, we downgrade the 2018-2020 net profit forecast to 326,608 pounds (the original value is 402 pounds); the EPS in 2018-2020 is 0.94,176,2.68 yuan per share respectively, and the corresponding PE is 21,11,8 times respectively.
Risk hint: the growth rate of China's fixed asset investment is accelerating downward, and the progress of bilateral cooperation is not as expected.