Main points of investment:
Event: the company released its annual report for 2018, with annual revenue of 10.253 billion, an increase of 4.55%, a net profit of 53 million, an increase of 5.01%, a deduction of 41 million, and a decrease of 12.29%.
Xinjiang has a prominent strategic position, and the future space is still huge. Affected by the comprehensive deepening of deleveraging and PPP inventory clearance and other factors, Xinjiang's GDP growth rate in 2018 was 6.1% (- 1.5pp), investment growth rate was-25.1% (- 45pp), of which infrastructure investment growth rate was-36.6% (- 79pp), highway investment growth rate was-72% (- 539pp), the growth rate was among the highest in the country. We believe that Xinjiang is the core area of the "Silk Road Economic Belt" and the frontier of opening up to the west with a high strategic position. in the future, it is bound to speed up the construction of railway and public planes, build a transportation framework between the inland of the East Union and Central Asia to the west, and have a huge space to make up for the deficiency.
The company is the leader of road and bridge construction in the region, with outstanding competitive advantages. The company has a number of first-class professional qualifications such as highway general contracting, municipal general contracting and roads and bridges, covering many fields of road and bridge construction. At present, it accelerates the transformation and upgrading of the whole industry chain from single construction to construction general contracting, and has outstanding competitive advantages in the province. In the past 18 years, the company was affected by the macro market environment, and the PPP project of Bayintuohai Highway Construction of Division 8-184th regiment-10th Division and the PPP project of new reconstruction project of G576 Shihezi-149Regiment Highway were stopped and suspended respectively, resulting in unfavorable growth for the whole year. However, we believe that the company is expected to benefit from the improvement of Xinjiang's shortcomings and the recovery of investment in the future.
Construction real estate improved month-on-month in the fourth quarter of last year, and orders-on-hand are still abundant. At the end of the reporting period, the company had orders in hand of 32.1 billion (+ 136%), which was 3.6 times the construction revenue of the corresponding period, of which the PPP project was 5.1 billion (+ 99%), accounting for 16% of the total; overseas orders in hand were 6.2 billion, corresponding to 5 times of overseas revenue. The company won a new bank credit line of 18.5 billion in 2018. At present, the storm of PPP inventory clearance has passed, the policy continues to increase and make up for deficiencies, and the financing area of enterprises tends to be relaxed gradually, and the company's on-hand orders are expected to accelerate the release of orders to promote performance growth.
The cash flow has doubled and the financial situation has improved. During the reporting period, gross profit margin was 10.25% (+ 1.2pp), sales / management / financial / period rates were 0.65% (+ 0.1pp) / 3.92% (+ 0.4pp) / 2.48% (+ 0.6pp) / 7.06% (+ 1.1pp); operating cash flow was 754 million (+ 110%), corresponding to 14 times of homing net profit, achieving positive growth for three consecutive years Although the company's debt ratio of 83.51% (+ 0.1pp) is at a high level, its financial position has improved.
Profit forecast and investment rating: from 2019 to 2021, the company's operating income is expected to be 12.275 billion yuan, 14.22 billion yuan and 16.054 billion yuan respectively; the net profit is 61 million yuan, 68 million yuan and 75 million yuan respectively; the EPS is 0.07 yuan, 0.08 yuan and 0.08 yuan respectively, and the corresponding PE is 132.3X, 118.1X and 107.5X respectively. Cover for the first time, giving a "neutral" rating.
Risk tips: 1, macroeconomic risk; 2, material price risk; 3, financial risk.
