Main points of investment:
Event: according to the annual report released by the company in 2018, the company achieved an operating income of 1.138 billion yuan in 2018, an increase of 21.71% over the same period last year, and a net profit of 302 million yuan belonging to the shareholders of the parent company, an increase of 31% over the same period last year.
The growth rate of Q4 performance has slowed down, and the steady growth for the whole year is basically in line with expectations. The company's Q4 revenue and homing grew by 25% and 16%, respectively, down 66pp/48pp from the same period last year. The annual growth rate is steady and in line with expectations, and we believe that the CAGR of the two indicators is expected to remain above 25% in the next three years.
The significant improvement in profitability is mainly due to the outbreak of high-margin planning consulting business and profits from the disposal of fixed assets, while investment income has turned from losses to profits and tax rates have decreased, but management fees and impairment losses have increased. The turnover capacity has decreased. During the reporting period, the gross profit margin of the company increased by 47.65%, with an increase of 0.69pp, of which the gross profit margin of the main business of design was 49.55%, with the same decrease of 1.79pp. We judged that the increase in gross profit margin was mainly due to a sharp increase in planning consulting business with a higher gross profit margin (55.55% in 2017). The sales / management / financial rates were 2.26% 12.05% and 0.46%, respectively, with year-on-year changes in 0.2pp/1.4pp/-0.2pp, and the total fees increased by 34% and 14.76% respectively, while the rate increased by 1.3pp. the impairment increased by 121%, accounting for 23.56% of net profit and increased 10pp, respectively. It is judged that the increase in management fee and impairment loss is mainly caused by the new acquisition of Zhonghua International. Investment income accounts for 2.5% of net profit; profit from disposal of fixed assets contributes 29 million; tax rate 13.66% decreases 2.2 ppp; net interest rate 26.51% increases 1.89pp, profitability increases significantly; cash receipt ratio 64.88% decreases 17pp, receivables / inventory turnover decreases 0.7pp/0.5pp, operating cash flow 41 million increases 5.7 times
High potential regional engineering consulting leader, benefiting from the blowout of the provincial highway planning market. Henan is located in the center, with a strong demand for highway investment and a huge market capacity for reconstruction and expansion. The company is the first listed engineering consulting enterprise in Henan and central China, with complete and leading qualifications, a solid leading position in Henan market, a highway market share of more than 75%, one of the best in provincial traffic hospitals, deep ploughing for many years, and a high level of business profits. the planning business has significantly benefited from the advance of the highway work in the province in the near future, which will effectively guarantee the future performance.
M & A China International demonstrates its transformation ambition and actively promotes cross-regional development and strategic cooperation. During the reporting period, the company acquired Zhongli International, the target is one of the former key design institutes of the Ministry of Coal Industry, the first batch of Grade An industrial design institutes, which has a large share in the coal and architectural design consulting in central China and the northwest EPC market, the acquisition will strengthen the company's qualification and production capacity, with large room for improvement of the target performance, less difficulty in integration and strong business synergy. In addition, the company has set up six regional management centers outside the province and implemented regional management policies, set up a new branch in Xiongan, and strategically invested in Liaoning Academy to become the third largest shareholder, attacking everywhere to promote cross-regional development. At the same time, the company signed strategic cooperation agreements with China Railway and China Railway Construction. We believe that the above measures will help the company accelerate its transformation and upgrading.
Profit forecast and investment rating: from 2019 to 2021, the company's operating income is expected to be 1.573 billion yuan, 1.984 billion yuan and 2.412 billion yuan respectively; the net profit is 410 million yuan, 512 million yuan and 618 million yuan respectively; the EPS is 2.99,3.74 yuan and 4.51 yuan respectively, and the corresponding PE is 12.9x, 10.3x and 8.6x respectively. Maintain the recommended rating.
Risk tips: 1, infrastructure investment is not as expected; 2, market competition risk; 3, financial risk.