This report is read as follows:
The company's Q1 performance growth in 2019 is in line with expectations, with sufficient overlay of on-hand orders, sufficient cash on hand and greater debt flexibility to support Q2-Q4 performance growth in 2019 is expected to gradually accelerate, the current valuation is low with a good performance-to-price ratio.
Main points of investment:
Maintain caution to increase holdings. Revenue of 420 million (+ 1.4%) and net profit of 20 million (+ 6.4%) in the first quarter of 2019 are in line with expectations. Maintaining the forecast for 2019-2021, the EPS is 0.63, 0.76 and 0.87 yuan, with a growth rate of 30, 25 and 15%.
Maintain the target price of 9.14 yuan, corresponding to 14.5 12.0 PE in 2019-2021, cautiously increase the rating.
The growth rate of 2019Q1 performance changed from negative to positive, the net cash flow of operation improved significantly, and the gross / net interest rate increased year-on-year. 1) 2018Q3-2019Q1 single-quarter return net profit growth rate-9.6 2pct/ 18.0 bonus 6.4%) operating cash flow-20 million (year-on-year + 170 million), cash-to-cash ratio of 148% (year-on-year + 44pct/ compared to 2018 + 86pct) / cash-to-cash ratio of 143% (year-on-year + 2pct/ compared to 2018 + 87pct) 3) Gross margin 18.4% (year-on-year + 0.3pct) / net margin 4.2% (year-on-year + 0.2pct), R & D and management rate 8.1% (year-on-0.4pct) / financial rate 3.8% (year-on-year + 0.1pct) 4) the loss of asset impairment was 20 million the same as the same period last year, accounts receivable and notes receivable / total assets 33.6% (year-on-year + 7.3pct/ compared with late 2018 + 4.5pct), inventory / total assets 21.9% (year-on-year-14.4pct/ compared to late 2018-0.2pct), asset-liability ratio 34.9% (year-on-year-14pct/ compared with late 2018 + 0.3pct).
The good momentum of Q1 newly signed orders in 2019 and the abundant cash on hand / low debt ratio are conducive to the smooth landing of orders, and the performance growth in 2019 is expected to accelerate quarter by quarter. 1) 2019Q1 newly signed contracts and won unsigned orders 2.53 billion (+ 20.8%), unfinished orders signed at the end of the period 6.61 billion (+ 49.6%) / about 2.3 times 2018 revenue, cash on hand 640 million (+ 133.8%) 2) the PPP policy has entered a stable period and the central government continues to promote the battle of pollution prevention and control, the release and landing of garden PPP projects are expected to be accelerated, and the company benefits from higher expansion flexibility and potential with lower asset-liability ratio; 3) the current valuation is relatively low, with the company repurchasing 9.586 million shares at an average cost of 6.81 yuan per share, and completing the rights issue cost of 7.13 yuan in April 2018.
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.