1. Investment event

The company publishes its annual report in 2019 and quarterly report in 2020. In 2019, the company achieved an operating income of 1.942 billion yuan, an increase of 4.08% over the same period last year, and a net profit of 199 million yuan, an increase of 18.61% over the same period last year. The deduction of non-net profit was 175 million yuan, an increase of 8.41% over the same period last year. In the first quarter of 2020, the company's current operating income was 230 million yuan, down 29.18% from the same period last year, and the net profit was 20 million yuan, down 12.33% from the same period last year.

two。 Analysis and judgment

The performance in 2019 is better than expected and is expected to improve in the second quarter of 2020. In 2019, the company achieved operating income of 1.942 billion yuan, an increase of 4.08% over the same period last year. Of this total, the income of the design consulting business was 942 million yuan, an increase of 6.83% over the same period last year. The total contract income of the project was 703 million yuan, down 0.7% from the same period last year. The business income of project supervision and project management was 170 million yuan, down 4.78% from the same period last year.

The business income of bidding agents and consulting projects was 88.6 million yuan, an increase of 23.17% over the same period last year. During the reporting period, the company realized a net profit of 199 million yuan, an increase of 18.61% over the same period last year. The deduction of non-net profit was 175 million yuan, an increase of 8.41% over the same period last year. In the first quarter of 2020, the company's current operating income was 230 million yuan, down 29.18% from the same period last year, mainly due to the decrease in total package income in the current period. The company realized a net profit of 20 million yuan, down 12.33% from the same period last year. The deduction of non-net profit was 11 million yuan, down 51% from the same period last year. Excluding the impact of subsidiary dividends, the parent company's net profit increased by about 63% in the first quarter compared with the same period last year. Due to the isolation of COVID-19 's epidemic situation in the first quarter, business requiring on-site operations such as project general contracting and project supervision was greatly affected by the epidemic, and it is expected that it will gradually improve in the second quarter.

Operating cash flow improved significantly. In 2019, there was a net cash inflow of 152 million yuan from the company's operating activities, an increase of 70.79% over the same period last year, mainly due to the increase in revenue from the main business in the current period.

The net cash flow of investment activities was-150 million yuan, compared with-12 million yuan in the same period last year, mainly due to the increase in investment in Zhongheng Huizhong, Yuanhe II and the decrease in maturing financial management. The net interest rate of raising funds has increased. In 2019, the company's gross profit margin was 24.35%, a year-on-year reduction in 0.76pct. Among them, the gross profit margin of design consulting is 35.26%, which is lower than the same period last year. The gross profit margin of the general contract of the project was 5.54%, an increase of 0.28pct over the same period last year. The gross profit margin of project supervision and project management was 34.82%, which decreased 4.09pct compared with the same period last year. The gross profit margin of bidding agents and consulting projects is 28.9%, an increase of 12.68pct compared with the same period last year. The company's net interest rate was 10.93%, an increase in 1.33pct compared with the same period last year.

During the reporting period, the company's expense rate during the sales period was 12.46%, an increase of 0.57pct compared with the same period last year.

Among them, the rate of management expenses was 12.22%, which was higher than that of the same period last year. The financial expense rate was 0.24%, compared with-0.03% in the same period last year. During the reporting period, the company's R & D expenditure rate was 4.54%.

The new bid-winning large order ensures future performance. In 2019, the company successfully won the 2.938 billion yuan design and construction general contract (EPC) project for hotels in Yangcheng Lake Scenic spot in Suzhou. At present, the project is progressing smoothly. The company has successfully won the bid of 314 million yuan for the general contracting project of the newly-built SIG Kangmeibao Tai 3 Plant of Zhongxin Group, which is being carried out smoothly at present. The company was announced as 867 million yuan of Kunshan Duke University Phase II EPC project (northwest side building monomer + outdoor project + integrated pipe network) project winning bidder, at present, the project is progressing smoothly. The above three bid-winning orders totaled 4.119 billion yuan, with the progress of the project, the company's future performance is guaranteed.

High dividends give back to shareholders and share buybacks lay the foundation for the implementation of equity incentives. In 2019, the company paid 4.35 yuan (including tax) to every 10 shares, and the company paid back shareholders with high dividends. During the reporting period, the company completed its second share buyback plan in 2018, with a total of 2.38 million shares repurchased, accounting for 0.87% of the company's total share capital, and the total amount paid was about 30 million yuan (excluding transaction fees). All the repurchased shares are used in the follow-up equity incentive plan. The smooth implementation of the buyback has laid a solid foundation for the subsequent implementation of the equity incentive plan and further mobilizing the enthusiasm of senior executives and core employees in the company.

3. A brief Analysis of Finance

Since 2014, the growth rate of the company's operating income has risen first and then declined. In 2019, the company's total operating revenue was 1.942 billion yuan, an increase of 4.08% over the same period last year. Since 2015, the growth rate of the company's return net profit has increased first and then declined, and the growth rate of the company's home net profit has rebounded in 2019.

The company's single-quarter revenue and return net profit show seasonal characteristics in recent years. 2018Q1 so far the company's single-quarter operating income growth showed a downward trend. 2018Q2 so far the growth rate of the company's net profit is on the rise. The net profit of Q4 company increased by 26% in 2019 compared with the same period last year.

Since 2014, the company's gross profit margin and net profit margin have shown a downward trend, mainly due to the impact of the increase in the proportion of general contracting. The overall expense rate has been stable since 2014.

4. Investment suggestion

It is estimated that the EPS of the company from 2020 to 2022 will be 0.81 soybean 1.17 yuan per share, and the corresponding dynamic price-to-earnings ratio will be 12.55, 10.46, 8.74, respectively. It is recommended that "rating" be recommended.

Risk tips: the risk of a sharp decline in fixed asset investment; the risk that the recovery of accounts receivable is not as expected.