Introduction to this report:
Poor financing dragged down construction and revenue, increased management and financial rates, and accrued impairment, etc., which led to a sharp decline in performance in 2018. The introduction of state-owned assets and gambling combined with improvements in the credit environment, corporate preferred stock financing, etc., may have prompted a recovery in performance in 2019.
Key points of investment:
Maintain the increase in holdings. 2018 revenue of 7.75 billion (-5%) /net profit of 300 million (-60%), 2019 Q1 revenue of 970 million (-25%) /net profit of -1.0 billion (-29%) fell short of expectations. Considering the company's debt constraints, the forecast for 2019-2021 EPS was 0.28/0.46/0.52 yuan (originally 0.29/0.46 yuan after dilution of EPS stock capital in 2019-2020), growth rate of 116%/65%/12%, considering the company's leading advantage, maintaining the target price of 5.6 yuan, corresponding to 2019- In 2021, it is proposed to distribute a cash dividend of 0.15 yuan (tax included) for every 10 shares, maintaining the increase in holdings.
2018H2 losses led to a negative increase throughout the year, a significant improvement in operating cash flow, and a slight increase in gross margins and a sharp drop in net interest rates.
1) Q1-Q4 revenue growth rate 70/79/-29/ -58%, net profit growth rate -1668/67/-111/ -120%, of which ecological environmental/ecological landscape/ecotourism/design and maintenance revenue was 34.7/32.3/8.4/180 million, growth rate -8/-2/-8/ +16%; 2) Net operating cash flow was 40,000,000 (+1.25 billion), revenue ratio 81.1% (+23.9pct) /payout ratio 56.2% (+10.2pct); 3) Gross profit ratio 25.8% (+ 0.6pct) /net interest rate 3.9% (-5.4pct), sales rate 1.5% (+0.3pct) /R&D and management fee rate 12.7% (+2.2pct) /financial rate 7.1% (+3.4pct); 4) Asset impairment loss of 140 million (+338%), balance ratio 72.4% (+3.7pct).
Introduce state-owned assets and optimize business layout to raise prospects and expectations, and improving credit is conducive to completing performance bets.
1) A new construction contract was signed in 2018 of 26.6 billion yuan/about 3.4 times 2018 revenue, and it is proposed to raise 1.87 billion yuan in preferred shares combined with credit improvements to speed up order execution; 2) The introduction of state-owned capital (Shenzhen Investment Control/Investment Control Win-Win Fund holds a total of 9.86 shares) to gamble the 2019-2021 performance of 6.5/10.8/1.19 billion, with a growth rate of 115/66/ 10%; 3) Optimizing employees (the number of employees reduced by 19% at the end of 2018) is conducive to reducing management costs; 4) debt-to-equity conversion price of 3.99 yuan/state-owned equity investment The cost of 3.76 yuan/employee shareholding (95.75 million shares) is 8.09 yuan.
Catalysts: introduction of PPP regulations, smooth issuance of preferred shares, smooth conversion of convertible bonds, etc.
Risk warning: Policies continue to vigorously clean up and rectify PPP projects, sharp increases in financing interest rates, etc.
