The regional railway is the leader of private enterprises, and the performance growth is steady. The company is mainly engaged in construction and municipal infrastructure investment services, accounting for more than 80% of the income from construction and municipal infrastructure investment services since 2017 and 87.63% of Prida in 2019. In 2019, the company's performance reached a new high, with operating income of 11.943 billion yuan, + 20.78% compared with the same period last year, and net profit of 351 million yuan, + 16.38% over the same period last year. The company deeply ploughs the rail transit construction in East China, while actively expanding to other parts of the country. At present, the company's rail transit project has entered 18 cities across the country. In addition, the real estate projects developed in recent years are mainly distributed in Northeast and East China.
In terms of orders, the company signed a total of 55 new projects in 2019, with a total amount of 7.756 billion yuan, compared with the same period last year. In 2019, the company won 9.294 billion yuan in construction projects,-29.94% compared with the same period last year, of which rail transit and municipal works accounted for 63.54%. The new bid-winning project of 2020Q1 costs 2.564 billion yuan, which is + 8.14% compared with the same period last year. We believe that with the counter-cyclical adjustment and increase this year, the company's orders are expected to continue to recover.
The company is expected to benefit from the counter-cyclical regulation of infrastructure. 1) the capital side of the industry has continued to improve, and the growth rate of fixed investment in infrastructure in a broad sense has returned to positive growth: as of May 31, 2020, 2.15 trillion of special bonds have been issued nationwide, of which the proportion of special bonds invested in infrastructure has significantly increased. Accounting for about 65.12% of the total, social financing increased by 3.09 trillion yuan in April, an increase of 1.42 trillion yuan over the same period last year. The funding side of the industry has continued to improve, and special debt support has been increased. At the same time, the monthly growth rate of broad infrastructure returned to 4.8% in April, exceeding the annual growth rate of 2019, and the subdivided industries all returned to positive growth, indicating to a certain extent that the situation of resumption of work and production in the infrastructure sector is optimistic, the effect of stable growth of infrastructure is beginning to show, and the upward logic is clear. 2) with the overall acceleration of rail transit construction in Zhejiang, the leaders in the province are expected to be the first to benefit:
"Traffic Power Zhejiang Plan" released, the company, as a leading private rail construction enterprise in the province, has "double special and double A" qualification, and has rich construction achievements in recent years. According to the company's strategic plan, it will develop the layout under the guidance of the market in the future. give full play to rail transit and underground engineering, municipal and road and bridge and other business advantages and project general contracting capacity, strengthen infrastructure and major government project investment and construction It is expected to benefit first. 3) the infrastructure construction in the Yangtze River Delta continues to increase, and there is a broad space for rail transit development: the "Integrated Development Plan for higher quality Transportation in the Yangtze River Delta region" has been issued. The company is the leader of regional rail transit construction in the Yangtze River Delta region. We believe that with the proposal of the "Plan", rail transit projects in the Yangtze River Delta will enter a period of intensive approval and construction, and the company's rail transit orders are expected to further increase in the next few years.
All the financial indicators are good, and there are prospects for future growth. 1) profitability is relatively stable: the gross profit margin of the company as a whole has been stable in recent years, basically maintained at more than 10%. Net interest rates rebounded in 2019 to 3.25% from + 1.25pp year-on-year. 2) the sales expense rate remains stable: the company's expense rate during 2019 was-0.75pp to 5.15% compared with the same period last year, mainly due to the reduction of financial expense rate and management (including R & D) expense rate. 3) the cash flow improved significantly, and the asset-liability ratio remained high: in 2019, the company's net operating cash flow increased by 694 million yuan compared with the same period last year, reaching 1.104 billion yuan, and the cash flow per share was 1.00 yuan, which was + 169.23% compared with the same period last year. The asset-liability ratio slightly decreased by 694 million pp to 78.84% in 2019.
Earnings forecast, valuation and investment rating: we expect the company's EPS to be 0.35,0.39 and 0.43 yuan per share respectively from 2020 to 2022, and the corresponding PE to be 13x, 12x and 11x. Counter-cycle continues to increase the size of infrastructure, the company as a regional rail transit infrastructure leader, valuation and performance are expected to benefit, with reference to the average valuation level since 2018 (15.08x), give the company 15 times valuation in 2020, corresponding to the target price of 5.27 yuan. Cover for the first time and give a "recommended" rating.
Risk hints: the spread of the epidemic exceeded expectations, the growth rate of infrastructure investment was not up to expectations, and the regulation and control of real estate exceeded expectations.