China high-speed railway announced that the company consortium received a notice of winning the bid for the general contract for the construction of the Sanyang railway project, with a total tender amount of about 9 billion yuan, including about 1.84 billion of the equipment part.
Comments:
Sanyo Railway is a major freight channel with strong profitability. the company previously announced that it would acquire the operation and maintenance of the project as well as operating income by buying shares, and participated in the bidding for the equipment of the project. the bid-winning announcement marked the landing of the company's equipment-side order. The Sanyang Railway project is a trunk railway channel in the national railway network planning to fill the gap in the east-west horizontal freight passage in the Central Plains. It is connected with the Monghua Railway, with an annual transport demand of 160 million tons, which is comparable to the Shuohuang Railway and other highly profitable large freight railways with strong profitability. The project agreed that the advance payment is not less than 30% of the equipment payment, providing the company with a stable cash flow. The Sanyang railway project is calculated according to the three-year construction period and the 30-year operation period, the company is expected to get three parts of the income after the completion of the investment: (1) the order for equipment and services during the three-year construction period is 4.2 billion yuan (600 million yuan in the first year, 1.65 billion in the second year and 1.85 billion in the third year). Including traditional and intelligent equipment sales, intelligent management, maintenance, monitoring and dispatching platform construction, BIM simulation system, consulting services, engineering services and engineering equipment leasing, lesson training, rolling stock leasing, etc. (2) Operation and maintenance, it is expected to receive a contract of 1.33 billion yuan during the three-year construction period, and the annual contract amount after operation in 2023 is not less than 1.8 billion yuan; (3) transportation revenue, the annual transportation revenue is expected to reach 50-6.5 billion yuan, and the estimated annual transportation income is 70 million yuan from 2023 to 2027, with an average annual income of 175 million yuan after 2028.
With the strategic transformation of China's high-speed railway, the whole line operation and maintenance project has been landing continuously. At present, the landed projects include Taizhou S1 Line, Hangzhou-Shaotai High-speed Railway, Tangshan Port Freight Line and Tianjin Metro Line 7, and are bidding for Tianjin Metro Line 2 and 3. The company is a whole industry chain system equipment company, the teams in all aspects of rail transportation have rich management experience, and the transformation of operation and maintenance services from equipment providers is a natural extension of the business model. After the rail transit, the market space is broad, and the market at the level of 100 billion is ready to start. With the formation and development of rail transit network in China, the rail transit industry has gradually entered the stage of attaching equal importance to construction and operation and maintenance. The approval of the urban rail industry has been accelerated since the new regulation No. 52 last year, and the new mileage of the subway is expected to exceed 1000 kilometers each year. Light rail and other multi-standard rail transit have great potential in the future. According to the estimates of railways and urban tracks that have been put into operation, under construction and planning, by 2023, the operating mileage of urban rail in China is expected to reach 16265 km, 2019-2023 CAGR 19.9%. According to industry experience, the expenditure of rail transportation operation and maintenance generally accounts for 2% to 3% of the total investment. Based on the median 2.5% calculation, considering the average cost of replacement cost of 1 billion yuan per kilometer, the market scale of urban rail operation and maintenance is expected to reach 406.6 billion yuan by 2023. And most cities, especially the third-and fourth-tier cities, do not have the experience of building and operating urban tracks, so there is an urgent need for professional teams to participate.
CIC Hi-tech is the largest shareholder, and the high performance assessment of equity incentives shows confidence. In 2018, CIC offered to buy Shenzhou high-speed railway at a price of 5.30 yuan per share. At present, the company is a central enterprise holding company. The largest shareholder is CIC Hi-tech, accounting for 20.27%, and the second largest shareholder is Haidian CIC, accounting for 12.59%. The background of CIC helps the company win projects such as BOT/TOT. In the implementation of equity incentives, the conditions for exercising rights show confidence. The conditions for exercising rights are that the revenue in 2020-2022 is not less than 3.59 billion yuan, 4.23 billion yuan and 5.13 billion yuan, the net profit is not less than 590 million yuan, 750 million yuan and 1.01 billion yuan, and the ROE is not less than 7%, 7.5% and 8%.
Profit forecast: we maintain the 2019-2021 EPS forecast of 0.16,0.22,0.29 yuan, corresponding to PE of 22,16,13 times, maintain the target price of 4.80 yuan, maintain the "recommended" rating.
Risk hint: the investment in railway fixed assets is declining, and the progress of new products and new projects is not up to expectations.
