It is proposed to acquire Millennium Design to build the capacity of the whole industry chain of infrastructure.
The company announced the acquisition of the revised draft of Millennium Design on September 19 and resumed trading. The company plans to acquire 88.23% of the shares of Millennium Design by issuing shares and cash, with a consideration of 1.429 billion yuan, of which 881 million yuan will be paid for shares, and the remaining 548 million yuan in cash will be raised through fixed increase. The Millennium Design commitment is to deduct the non-return net profit of 0.96 million yuan in 17-19 years, corresponding to the PE16.87 times in 2017. Millennium design business covers many fields such as large municipal, urban planning and landscape, among which large municipal engineering consulting and design is the core business. at present, the company already has a number of first-class qualifications for construction general contracting, such as water conservancy, port, navigation and municipal projects. after the acquisition of Millennium Design, it is expected to achieve rapid expansion to municipal and river basin management and other non-seawall projects and general contracting, and build the whole industry chain capacity of various types of infrastructure projects.
The Millennium Design has sufficient orders on hand, and the financial indicators are leading in the industry.
Since the Millennium Design was listed on the new third board, the performance growth rate has been in the leading level in the industry and continues to accelerate, and the synchronization of its income and profit growth is better than the industry average. According to the company announcement, by the end of June, the Millennium Design orders on hand were 1.181 billion yuan, of which 696 million yuan were confirmed in 18 years and later, which is 2.4 times the income in 16 years. Sufficient orders have a high guarantee for future growth. The millennium design gross profit margin has remained above 40% since its listing, and the net profit margin has remained above 20%, which is higher than that of A-share comparable companies. It is expected that it will have a greater positive impact on the overall performance growth and profitability improvement of the company in the future.
Relying on the acceleration of the traditional main business / PPP transformation, BT has entered the payback peak, and the future volume of the second main business can be expected.
According to the latest seawall Construction Plan, we estimate that the national investment in simple seawall projects will be about 20 billion yuan in the next 10 years, and the market space for reclamation projects closely related to seawall projects will exceed 400 billion yuan during the 13th five-year Plan period. In the past, the company has a market share of about 10% in the national seawall project market, and it is likely to benefit from the reclamation of a broad market space in the future, and relying on the PPP model to make a great breakthrough in the relevant municipal engineering field, H1 company municipal business income growth rate of more than 300%, the transformation has achieved initial results. The BT projects undertaken by the company since 2013 will have a peak in payback and investment income recognition in 17-19, and we expect to contribute about 20 million yuan to the company's additional performance every year. The film invested by Orange Lexin Entertainment is expected to be released this year, and the company's second main business is expected to be released with the support of the rapid growth of main business income and rebate.
Growth momentum conversion between new and old is smooth, sustained high growth is expected, and the "buy" rating is maintained.
The company's acquisition of Millennium Design will effectively impact the slowdown in the growth rate of the seawall project on the company's performance. In the future, the volume growth of the second main business will also become a new growth pole of the company. Based on the company's current project progress, we reduce the company's EPS for 17-19 to 0.17 EPS0.16/0.37/0.49 0.30 EPS0.16/0.37/0.49 0.41 yuan, assuming that the Millennium Design 18 years is completely diluted and table 17-19 diluted. Based on the good development prospect of the company after M & A, we approve to give the company 18-year PE37-43 times, corresponding to the target price of 11.10-12.95 yuan. If the 18-year-old millennium design year-round table, the target price corresponds to 18-year PE30-35 times, PEG in comparable companies in a lower level, maintaining the "buy" rating.
Risk hint: the company's engineering and the second main business expansion are not as expected; the return of the BT project is not as expected.