The company recently released a report for the third quarter of 2019 that its revenue in the first three quarters of 2019 was 2.447 billion yuan, an increase of 2.17%, and its net profit was 527 million yuan, an increase of 4165.17%. The comments are as follows:
The growth rate of revenue and newly signed orders has declined, and the main goal may be to strengthen the payback in the short term.
The company's newly signed orders totaled 2.761 billion in the first three quarters of 2019, down 58 percent from the same period last year, or from a large base for major projects such as Hangzhou Metro Line 7, Line 3, and Hangzhou-Fuyang intercity railway, which were awarded in the same period last year. In the same period, the operating income was 2.447 billion yuan, an increase of 2.17%, and the growth rate in the first three quarters was 29.24%,-10.96% and-3.51 respectively. Combined with the significant improvement of the company's operating cash flow, we believe that under the background that the financing environment of listed private construction enterprises has not improved significantly, it may be a better strategy to pay close attention to the return of funds and weaken the requirements of rapid revenue growth. The company's gross profit margin was 9.93%, down 4.24% from the same period last year. The decline in gross profit margin may be due to the fact that the company did not carry out a PPP project with a higher gross margin in 2019.
The rate of financial expenses has increased, and the invested trust products contribute a lot of net profit.
The company's expense rate during the first three quarters of 2019 was 15.55%, an increase of 2.84 percentage points over the previous value. Among them, the rate of sales expenses was 0.54%, with an increase of 0.24%; the rate of management expenses was 3.8%, down by 2.92%; the rate of financial expenses was 7.85%; and the rate of R & D expenses was 3.36%, an increase of 0.33%. In the same period, the company rushes back 49 million yuan in asset impairment, with the previous value of 3.9 million yuan, mainly due to the reduction of receivables in the current period and the provision for bad debts in the previous period. The substantial growth in the company's performance is mainly due to the improvement of the stock market and the company's investment trust products. Zhenghao 71 Securities Investment Collective Fund Trust Plan equity products) substantially increase the company's net profit. Among them, the investment income was 639 million, which was significantly higher than that of 43 million in the same period last year. Combined with the fair value change income, Shaanxi Investment Zhenghao 71 Securities Investment Collective Fund Trust Plan held 261 million floating profits from equity products. the company's net profit increased significantly in the first three quarters of 2019, and the company made a net profit of 527 million yuan in the same period, an increase of 4165.17%.
Under the enhanced payback, the operating cash flow improved significantly, and the asset-liability ratio decreased.
The company's cash-to-income ratio was 1.4138, an increase of 42.08 percent, while in the same period, the cash-to-cash ratio was 1.0686, an increase of 9.44 percent. In the same period, the net cash flow generated by operating activities improved significantly, with a net inflow of 712 million, compared with a previous value of 184 million. The company's asset-liability ratio at the end of September 2019 was 49.89%, down 10.85% from the end of 2018, mainly due to the company's payment of the principal of all the priorities of the above trust plan (a total of 1.6 billion), as well as the repayment of some short-term and long-term loans.
Investment suggestion
The growth of the company's main construction business is lower than expected, but with the integration of the Yangtze River Delta and the holding of the 2022 Asian Games in Hangzhou will release a lot of infrastructure demand, the company's revenue is expected to grow rapidly. The return on investment exceeded the market average and realized a substantial increase in profits. We maintain the company's 2019-2020 EPS forecast of 0.34,0.38,0.38 yuan per share, corresponding to PE of 8, 7, 7 times, maintaining the "buy" rating.
Risk hint: the decline in the growth rate of China's fixed asset investment is accelerating, and the company's business payback is not up to expectations.
