This report is read as follows:
The increase in financial expenses is more than the addition of asset impairment losses, which is a drag on the growth rate of performance. The company has sufficient orders / cash and low debt ratio and has more growth flexibility in 2019. At the same time, a higher proportion of share buybacks convey strong confidence.
Main points of investment:
Maintain caution to increase holdings. In 2018, revenue 2.85 billion / + 11% and return net profit 250 million / + 3% were lower than expected. Considering the improvement of credit and improving the performance flexibility, the forecast EPS for 2019-2021 was raised to 0.63 EPS 0.76 EPS 0.87 yuan (the original 2018-2020 EPS was 0.61 EPS 0.69 yuan), with a growth rate of 3025 shock 15%. Due to the upside of the plate valuation center, the company was valued at 14.5 times PE in 2019 and raised its target price by 9.14 yuan (original 7.20 yuan), corresponding to 14.5 pesos 12.0 PE in 2019-2021, with a cash dividend of 2.0 yuan (including tax) per 10 shares, carefully increasing the rating.
2018H2 performance is negative, operating net cash flow is positive, gross profit margin is slightly higher / net profit margin is slightly lower. 1) the growth rate of Q1-Q4 revenue is 43%, and the growth rate of home net profit is 49%, 23%, 17% and 17%, respectively. The growth rate deviates from the increase in financial expenses and the impairment of assets recognized. 2) 60 million (+ 190 million) of operating net cash flow is mainly due to the increase in credit of procurement expenditure, with a cash-to-cash ratio of 62.1% (+ 0.3pct) / cash-to-cash ratio of 55.9% (- 9.5pct). 3) Gross profit margin 19.3% (+ 0.5pct) / net profit rate 8.8% (- 0.8pct), R & D and management fee 4.7% (- 0.5pct) / financial rate 2.6% (+ 1.6pct); 4) asset impairment loss 50 million (+ 66.7%), accounts receivable / total assets 41.3% (+ 12.5pct), inventory / total assets 31.5% (- 0.9pct), asset-liability ratio 34.5% (- 9.4pct).
Both orders-on-hand and cash-on-hand are more flexible to expand with a lower debt ratio. 1) at the end of 2018, the company's cash on hand increased by 174%, the asset-liability ratio was at a low level in the industry, and the expansion flexibility was greater; 2) the company's active expansion into the ecological and environmental protection and cultural and tourism industries has gradually achieved remarkable results. The newly signed contract 5.6 billion / the unfinished order signed at the end of the period in 2018 is 6.8 billion, which is 2.39 times the revenue in 2018, which is of good growth. 3) the company forecasts revenue of 3.5 billion (+ 23%) / net profit of 300 million (+ 20%) in 2019, indicating growth confidence; 4) the company buys back 9.586 million shares (1.87% of the total share capital), with an average cost of 6.81 yuan per share.
Catalysts: sustained and rapid growth of social finance, increased ecological and environmental protection policies, gradual downward interest rates, and so on.
Risk tips: a sharp decline in social finance, a sharp slowdown in fiscal expenditure, interest rates continue to rise sharply, and so on.