Events:
The company announced on the evening of June 24 that the company won the bid for the environmental improvement project of Shilongshan South Block and the EPC general contract project of Lingshan Road upgrading project, with a project amount of 181 million yuan. In this regard, our comments are as follows:
Main points of investment:
Another order for EPC project, sufficient on-hand orders to ensure performance growth
As the leader of the consortium, the company won the bid for the environmental improvement project of Shilongshan South Block and the EPC general contract project of Lingshan Road upgrading project with a total amount of 181 million yuan and a construction period of 360 days. The construction content mainly includes landscape promotion, design and construction of valley landscape, water supply and drainage and landscape lighting, new reconstruction and expansion of road holes and bridges, and so on. Since the company acquired the first phase of EPC project of Boao Agricultural National Park in 2017, it has accumulated rich experience and laid the foundation for the company to expand its EPC business. Since then, we have successively obtained the general contract of landscape improvement project of Boao Corridor (EPC), the greening and upgrading project of Boao Binhai Avenue (EPC), the first phase of Boao Agricultural National Park, the EPC general contract project of Zhejiang China Aviation Tongfei Research Institute, the general contract of Tongjian Lake Road supporting Project (EPC), and the tourism infrastructure supporting project of Liangzhu ruins Park. At present, the contract project in hand is more than 700 million yuan, which is 133% of the company's revenue in 2018, and the on-hand order is sufficient to ensure performance growth.
From design to EPC, the logic of growth continues to be realized.
The company has double Grade A qualification for landscape architecture and construction design. with the West Lake Comprehensive Protection Project, Xixi National Wetland Park, "G20 Hangzhou Summit", "Xiamen BRICS leaders meeting" core landscape design and other works to create a good brand image, is a leading enterprise in the landscape design industry. While consolidating the design business, the company gives full play to the design business to grasp the overall entrance advantages of the project, and actively expand to the downstream EPC, engineering and other business, with obvious advantages (the design business generally accounts for only about 3-5% of the total contracting scale of the project, and the expansion of EPC business can greatly improve the revenue level and open up new growth space). The gross profit share of the company's EPC business increased from 11.75% in 2017 to 40.37% in 2018. The growth logic continues to materialize.
Profit forecast and investment rating: maintain the company's "overweight" rating. We are optimistic about the company's brand advantages and the growth space brought about by the expansion of EPC business, and slightly raise the company's profit forecast. It is estimated that the company's 2019-2021 EPS will be 0.77,0.98,1.14 yuan respectively, and the previous share price PE will be 28,22,19 times, maintaining the company's "overweight" rating.
Risk hints: the risk that the project expansion is less than expected, the risk of a substantial increase in accounts receivable, the uncertain risk of expanding into the engineering field, the upside risk of interest rate, the lower-than-expected risk of contract execution and the downside risk of macro-economy.