The company is the leader of domestic prestressed steel and has strong competitiveness in cost control and quality stability. As one of the standard setters of high-speed rail plate, it also has strong competitiveness. In 2018, the company achieved 2.338 billion in revenue and 150 million in net profit. In particular, 269 million of operating cash flow reached the best level since listing, and the overall operating quality has been significantly improved. Benefiting from the stabilization and rebound of infrastructure investment and the company's new production capacity in 2019, the company's 19-year prestressed steel is expected to expand to a certain extent. The high-speed rail track plate business, under the background of stable total railway investment, is facing the increase of the company's market penetration in the high-speed rail track plate market, as production equipment is upgraded from disposable to reusable to reduce the depreciation rate of production equipment, and the high-speed railway track plate production management software developed by the company has realized external orders to improve revenue.
We estimate that from 2019 to 2021, the company is expected to achieve income of 2.522 billion yuan, 2.696 billion yuan and 28.39 yuan, and return to its mother net profit of 204 million, 206 million and 227 million, corresponding to 0.24,0.24 and 0.27 yuan per share EPS. Considering that the company has long benefited from the construction of infrastructure and Xiongan New area, coupled with the certainty of performance growth in 2019, it is rated for the first time according to its 19-year earnings 30 times PE valuation, with a target price of 7.20 yuan.
The quality of operation has improved significantly in the past 18 years.
The 2018 annual report revealed that during the reporting period, the total operating income of the company was 2.338 billion yuan, and the net profit was 152 million yuan. The net profit belonging to the shareholders of the parent company was 150 million yuan, up 7.30%, 27.73% and 27.22% respectively over the same period last year. The company plans to pay a dividend of 0.1 yuan per share, which has been paid every year since it went public in 2015.
In addition to the 77.27% year-on-year growth of prestressed track plate business, sales of prestressed steel wires, strands and bars decreased in 2018 compared with 2017.
This is mainly due to the reduction of outsourcing processing volume from the point of view of risk control. Correspondingly, the company's operating cash flow achieved a net inflow of 257 million, the best level in recent years.
It is expected to benefit from infrastructure development in 19 years.
The company's main income is composed of prestressed steel and high-speed rail track slab, which is the specific application of prestressed steel in the field of high-speed rail.
There is room for growth in these two sectors in 2019, which is generally due to the rebound in the growth rate of domestic infrastructure investment in 2019.
New production capacity of prestressed steel
As a low-cost and cost-effective high-strength material, prestressed steel is widely used in infrastructure and civil buildings, and gradually extended to nuclear power construction, airport engineering, mine Anchorage, marine engineering and other special fields. The high probability of increasing the speed of infrastructure investment will increase the demand for prestressed steel. In 2018, domestic infrastructure investment increased by 1.79% over the same period last year, an absolute low in recent years. In particular, the cumulative growth rate announced in September 2018 was only 0.26% year-on-year, but since then, the cumulative growth rate of infrastructure investment has rebounded. The cumulative growth of infrastructure investment from January to February 2018 has rebounded to 2.5%. At present, the market generally predicts that the growth of infrastructure investment is expected to return to 8-10% in 2019.
The company has five prestressed steel production bases in four regions: Benxi in Liaoning, Urumqi in Xinjiang, Beichen in Tianjin and Hejian in Hebei, with an annual production capacity of more than 600,000 tons. It is the largest manufacturer of professional prestressed material production enterprises in China. The company is a leading enterprise of prestressed steel in China, which means that it is very likely that the company can seize the growth of the demand for prestressed steel. And Baozelong base has new production capacity in 2018, and the main products are galvanized steel strands.
Of these, some production capacity has been put into production in 2018, and some production capacity will be put into production in 2019.
Triple advantages of High Speed Railway track Slab
As a member of the former major research project of the Ministry of Railways-"Experimental Research on Ballastless track structure system of Pretensioned Prestressed system (2012G005-A)", the company participated in the technical discussion and feasibility analysis, trial production, scheme review, trial evaluation and so on, and adopted the technology of pretensioning method to manufacture CRTS III type pretensioned ballastless track slab. As one of the standard makers, the company has a lot of technical reserves in the high-speed rail slab.
In terms of specific projects, the company's track plates have been widely used in high-speed rail lines such as Zhengzhou-Xuzhou high-speed railway, Beijing-Shenyang high-speed railway, Zhengzhou-Fuyang high-speed railway, Shangqiu-Hefei-Hangzhou high-speed railway. At present, we have some track plate supply orders for Jingxiong high-speed railway, Ganzhou-Shenzhen high-speed railway and Zhengzhou-Jinan high-speed rail project. In recent years, the company's annual orders for railway lines have increased from 1 to 3.
We believe that there are three advantages in the company's high-speed rail slab business.
First, the market penetration of private enterprises as high-speed rail equipment suppliers is steadily increasing. In recent years, domestic railway investment has basically stabilized at around 800 billion, with little change. However, judging from the fact that the company's annual on-hand orders have risen from one line to three lines, the company's penetration in the high-speed rail board market is still on the rise.
Second, the production line of the company's track plate has been upgraded from previous one-time use to re-use, which is equivalent to reducing the depreciation rate of the track plate production line. In the construction of Xinxiang plate factory, the company adopted the self-designed automatic production line of CRSD2025 high-speed railway track plate relocated from Huaiyang plate factory, which can not only increase the production capacity of a single plate factory and reduce the cost, but also save a lot of civil engineering investment by using the equipment repeatedly, which greatly reduces the construction investment of track plate and brings a new growth point for the profit of track plate. At the same time, the mature promotion of the new production line has also created conditions for winning more market orders.
Third, the high-speed rail track plate production management software developed by the company has achieved external orders and is expected to continue to grow in the future. The interim regulations on data Interface of CRTSIII Slab Pretensionless Pretensioned Prestressed concrete track Slab Manufacturing Information system led by the Railway Corporation has been revised. CRTS Ⅲ plate production management information system and ballastless track plate concrete sleeper production management software have been successfully implemented in many plate factories in the past two years, and the pedestal method system has been improved, and the flow unit method software control system has been upgraded to version 3.0. During the reporting period, Yinlong signed cooperation agreements with a number of plate factories to control the whole production process of CRTSIII two-way pretensioned ballastless track plate by using flow unit method software system, realizing the traceability of raw materials and production process parameters, and improving the information and digital level of track plate production of high-speed railway in our country. The newly built Hefei-Anqing-Jiujiang high-speed railway line and Zhengzhou-Wanzhou line have customized software functions and developed a variety of intelligent tools, such as automatic identification management system, which not only trace the quality of raw materials and various parameters of the production process, but also improve the level of on-site management, improve production efficiency and improve work results, which are recognized by the market.
Profit forecast and investment advice
The company is the leader of domestic prestressed steel and has strong competitiveness in cost control and quality stability. As one of the standard setters of high-speed rail plate, it also has strong competitiveness. In 2018, the company achieved 2.338 billion in revenue and 150 million in net profit. In particular, 269 million of operating cash flow reached the best level since listing, and the overall operating quality has been significantly improved. Benefiting from the stabilization and rebound of infrastructure investment and the company's new production capacity in 2019, the company's 19-year prestressed steel is expected to expand to a certain extent. The high-speed rail track plate business, under the background of stable total railway investment, is facing the increase of the company's market penetration in the high-speed rail track plate market, as production equipment is upgraded from disposable to reusable to reduce the depreciation rate of production equipment, and the high-speed railway track plate production management software developed by the company has realized external orders to improve revenue.
We estimate that from 2019 to 2021, the company is expected to achieve income of 2.522 billion yuan, 2.696 billion yuan and 28.39 yuan, and return to its mother net profit of 204 million, 206 million and 227 million, corresponding to 0.24,0.24 and 0.27 yuan per share EPS. Considering that the company has long benefited from the construction of infrastructure and Xiongan New area, coupled with the certainty of performance growth in 2019, it is rated for the first time according to its 19-year earnings 30 times PE valuation, with a target price of 7.20 yuan.