Revenue declined slightly, EPC and overseas EPC projects had a strong momentum.
The company achieved operating income of 1.66 billion in 2016, a decrease of 7.85%, mainly due to the regulation and control of the real estate market, the signing of orders and the slow progress of some projects. The company has plenty of orders on hand, and by the end of 2016, a total of 3.263 billion projects have been signed and won. The company's high-end design business grew the fastest in 2016, with revenue of about 42 million yuan, an increase of 61.50% over the same period last year, and the design business also grew rapidly, with an increase of 8.62%. EPC mode was adopted to assist landing. The company stepped up the promotion of the EPC model project in 2016, accounting for 70.80% of the engineering business revenue. At the same time, the company made full use of the "Belt and Road Initiative" policy to promote the completion of overseas EPC, undertaking the Myanmar Pan Pacific Hotel project.
We use the index of "gross profit margin-business tax and additional / sales income" to eliminate the change in accounting caliber brought about by "revenue change". Using this index, we calculate that the gross profit margin for 2016 is 17.05%, an increase of 2.07 percentage points over the same period last year, mainly due to an increase in the proportion of design projects with higher gross margins.
Large clients contribute a large proportion of income, and overseas projects are making rapid progress.
Wanda Group is currently the largest high-end star hotel investor in China, the company is the first-class supplier of Wanda Group, and the business cooperation between the company and Wanda Group is relatively stable. In addition, the top five customers account for 45.06% of annual sales, and the sources of income are relatively concentrated.
The company is actively exploring overseas markets, and 13 overseas contracts were executed in 2016, equivalent to 181 million yuan, of which engineering business accounted for 74.45%, mainly in Yangon, Myanmar.
During the period, the expense rate increased and the net profit increased steadily.
During the 16-year period, the expense rate was 5.49%, an increase of 0.9% over the same period last year, of which the sales expense rate was 0.89%, an increase of 0.18% over last year, mainly due to the increase in personnel costs of the company's expanded sales team; the management expense rate was 3.66%, an increase of 0.59% over last year, and the increase in wages and consulting fees due to expansion and listing. The financial expense rate increased by 0.94%, an increase of 0.14% compared with the same period last year, as loans increased and interest increased. The impairment loss of assets this year was 87.7962 million, an increase of 57.30% over the previous year, mainly due to the slowdown in fixed investment and the shortage of funds in real estate enterprises, resulting in a slowdown in the rate of repayment of accounts receivable, an increase in the balance and an increase in the age of accounts. During the period, the net profit was 80.93 million yuan, down 26.15% from the same period last year.
Investment suggestion
The company's main business vigorously promotes the EPC model to assist the design project landing construction; the brand effect of CCD design continues to expand and is widely recognized in high-end star hotels, high-end residential and commercial office fields; the proportion of overseas projects is gradually increasing, and the implementation effect is good, and the progress of the landing project is close to 50%. To sum up, the business situation of the company continues to improve, and we expect EPS to be 0.52,0.60,0.69 yuan per share in 2017-2019. The corresponding PE is 68, 59, 52 times, covering for the first time, giving the company a "buy" rating.
Risk tips: real estate investment continues to decline, major client relationship volatility risk