Public packaging orders account for a relatively high proportion, and the amount of projects on hand is full
The total amount of new orders signed by the company in the second quarter of 2017 was 1,136 million yuan, of which: 718 million yuan for public decoration orders, accounting for 63.20%, and 344 million yuan for residential decoration, accounting for 30.28%. The amount of signed and uncompleted orders amounted to 3.704 billion yuan, accounting for 151.99% of revenue in 2016, a relatively full proportion. Within 17 years, the Dongyuan County photovoltaic power generation EPC project and the rehabilitation international project were signed, totaling 590 million yuan. At present, the Anhui and Jiangxi photovoltaic power plants have been gradually put into operation, and steps have been taken to raise capital. The photovoltaic business has become the company's new strategic direction.
Revenue and gross profit are growing steadily, and the gross margin of the photovoltaic business is high
The company achieved revenue of 1,294 million yuan in H1 in '17, an increase of 26.17%, mainly due to the repayment of finishing orders signed last year and the increase in photovoltaic projects. Among them: public renovation was 822 million yuan, an increase of 26.16%; the residential renovation business was 389 million yuan, an increase of 8.35%; and the photovoltaic power generation business was 51 million. There was no such business in the same period last year. After excluding the changes in the accounting caliber brought about by “business reform and growth”, we concluded that H1's gross margin in 2017 was 13.76%, an increase of 1.27 percentage points over the same period in 2016. The main reason was that the gross margin of photovoltaic power generation was higher, reaching 67.55%.
Expense rates increased during the period, and preparations for impairment declined year-on-year
The fee rate for the first half of '17 was 5.01%, up 0.28 percentage points from the same period last year. Among them, the sales expense ratio was 1.03%, which was basically stable; the management expense ratio was 3.42%, up 0.79 percentage points from the previous year, mainly due to the increase in management expenses caused by the addition of subsidiaries; the financial expenses ratio was 0.56%, down 0.52 percentage points from the previous year, mainly because some debt was repaid after the increase was issued, and interest expenses were reduced. Asset impairment losses amounted to $26 million, a decrease of 18.75% over the same period. The company achieved net profit of 82 million yuan in the first half of the year, an increase of 51.85%; the net interest rate was 6.34%, an increase of 1.07 percentage points over the previous year. The company expects profit of 98 million to 121 million in the first three quarters of this year, an increase of 30% to 60%. The main reason is the promotion of building decoration and photovoltaic grid-connected power generation.
Improved operating cash flow and improved project payback
The company's 2017 H1 revenue ratio was 94.05%, up 29.17 percentage points from the previous year. The reason was the revenue and cash flow situation from the company's product sales improved; the payout ratio was 96.14%, an increase of 27.2 percentage points over the previous year, due to an increase in the company's payments. The company's net operating cash flow was $55 million, an increase of 67.13% over the same period.
Investment advice
The company's revenue is growing steadily, the amount of orders on hand is sufficient, the operating cash flow situation has improved, and future performance improvements can be expected. Financial expense rates have declined, and revenue and profit levels are expected to grow steadily. Therefore, we expect EPS to be 0.38, 0.49, 0.64 yuan/share from 2017 to 2019, and the corresponding PE will be 33, 26, 20 times, maintaining the “increase in holdings” rating
Risk warning: investment in fixed assets is declining, and the progress of photovoltaic projects falls short of expectations