Event: the company released its annual report for 2018, with annual revenue of 945 million, an increase of 30.07%, a net profit of 76 million, an increase of 25.08%, and a deduction of 59 million, an increase of 7.47%.
The rapid growth of EPC business supports the overall performance of the company. In recent years, the company has greatly expanded its EPC business in order to create a new growth pole. Since 2017, it has undertaken a number of EPC projects in Gongshu District of Hangzhou by virtue of its location advantages, with a total value of about 2.02 billion, corresponding to 3.3 times the total EPC revenue in 2017-2018. During the reporting period, EPC revenue increased by 84% with a sharp increase of 84%, increasing 12pp to 42%. Driven by this, the overall revenue / homing growth rate reached 30% and 25% respectively to achieve rapid growth. In the future, the company will strive to undertake more EPC projects, and further expand the scope of EPC business, from the field of architectural design to municipal, garden, decoration and other fields, which is expected to continue to support the company's overall performance.
EPC accounts for higher gross profit margin and lower gross margin. Cash flow has increased significantly, and the debt ratio has decreased significantly, which is at a lower level within the plate. During the reporting period, the gross profit margin was 20.19% (- 3.01pp), which was judged to be due to the faster growth of EPC business with low gross margin. The sales / management / financial / period rates are 2.41% (- 0.4pp) / 7.67% (+ 0.1pp) /-0.18% (- 0.1pp) / 9.91% (- 0.4pp) respectively, with a net interest rate of 8.03% (- 0.43pp) and operating cash flow of 93 million (YOY+56%), mainly due to the company's business expansion, accelerated turnover and cash recovery. Debt ratio 21.22% (- 5.6pp)
Business is concentrated in East China and Zhejiang Province, with high quality customers and good market prospects, which is expected to fully benefit from the construction of integration. From a regional point of view, the company's business is reintegrated in East China, accounting for 100% of the annual revenue (+ 14pp), of which income in Zhejiang Province accounts for about 75% (+ 5pp). We believe that the company's business in the economically developed areas of the Yangtze River Delta is expected to explore more opportunities and reduce the risk of project implementation, and EPC customers are mainly Hangzhou Gongshu District Government platform Company, which is basically safe to pay back, and is expected to enjoy the dividend of integrated construction in the Yangtze River Delta in the future. Undertake more EPC and design projects
Listed upstart, take advantage of the potential of IPO active mergers and acquisitions to expand, growth is more interesting. The company was listed in 2018.5 and actively promoted the acquisition of Hangzhou shares (85.68% equity) during the reporting period. The target has a number of professional comprehensive Class A qualifications, and has a prominent competitive advantage in gas thermal design and other subdivision fields. the core technology and existing business resources in the fields of gas thermal power, municipal engineering and construction engineering design and general contracting will strengthen the company to a certain extent. As of 2019.3, the issue of shares to acquire the subject matter has been conditionally approved by the CSRC. The other side of the transaction promises that the parent deduction of 2018-2021 of the shares will not be less than 38.9 million / 46.2 million / 54 million / 62.3 million, and once the acquisition is completed, it will enhance the company's business capacity and increase profits. In addition, we believe that the company will continue to make use of listing financing facilities for mergers and acquisitions in the future to expand the industrial chain and regional layout, and the growth will be more interesting.
Profit forecast and investment rating: the company's operating income from 2019 to 2021 is expected to be 1.154 billion yuan, 1.36 billion yuan and 1.561 billion yuan respectively; the net profit returned to the parent is 84 million yuan, 93 million yuan and 101 million yuan respectively; the EPS is 0.4,0.44 yuan and 0.48 yuan respectively, and the corresponding PE is 52.9X, 48.1x and 44.3X respectively. Cover for the first time and give a "recommended" rating.
Risk tips: 1, the project is not as expected; 2, the market competition risk; 3, the acquisition is not as expected.
