Investment logic
Batch hardcover benchmarking, sound management, outstanding ability. The company focuses on providing developers with batch fine decoration services, the main customers are Vanke, Poly, Agile, Xuhui and other high-quality housing enterprises. Over the years, sound operation, strict compliance with risk control standards, selection of high-quality cash flow projects, industry-leading management refinement, profitability, operating capacity and growth quality are better than their peers, and the business ability is highly recognized by the head developers.
Downstream changes, batch hardcover into the "good money drive bad money" era. Real estate enterprises are facing changes: declining profitability and strict financing control. Housing companies are becoming more cost-sensitive, which means that ① needs to choose more "reliable" partners. Under the strict control of fees, the pressure on the protection of delivery rights faced by housing enterprises has greatly increased, putting forward higher requirements for suppliers, and the phenomenon of partly relying on "relationship" to make money will be curbed, which is conducive to enterprises that win by quality. ② industry reshuffle, "leftover" is the king. As cash flow tightens, the already bad payment terms of housing enterprises become even worse, and the upstream has been greatly affected. Competitors' inability to expand is an opportunity for the company.
The in-depth management ability is ahead of the peers, and the negative effect of scale can be effectively resolved. Batch hardcover has high complexity and strong repeatability. the company realizes in-depth management of business through specialized division of labor, standardized construction and systematic training, so as to effectively improve construction quality and efficiency. We believe that its ability and awareness of in-depth management is ahead of its peers and can effectively resolve the negative effects of scale. At present, the size of the company is still limited, but its management and organizational advantages will become increasingly prominent in the development, and strongly support the large-scale expansion of the business.
With the promotion of the new strategy, short-term growth momentum may exceed expectations. ① is currently promoting a new growth strategy, actively supplement the marketing team, to "fill in the grid" in the form of "100 cities + top 100 housing enterprises" to develop business, is expected to open up new growth space. It is expected that in the future, the customer structure will be more diversified, reduce the dependence of major customers, improve revenue stability, and enhance the overall bargaining power. The financial fundamentals of ② are good, and IPO will complete financing of about 900 million yuan in 2020. In the case of a depressed industry and more stringent payment conditions for housing enterprises, counter-trend expansion can be achieved in high-quality customers with no real risk but tight payment conditions through proper trade-off and balance.
The growth is resilient and the performance is superior to that of its peers. As of 3Q20, the company's revenue growth rate is 19.15%, the industry average growth rate is only-7.70%, and the growth resilience is much higher than that of its peers. 4Q20 newly signed order 780 million yuan; as of 4Q20, has signed unfinished order 2.95 billion yuan, has won the bid unsigned order 1.28 billion yuan, a total of 4.23 billion yuan. Considering that new 1H21 contracts can still translate into revenue, high growth is expected in 2021.
Investment suggestion
We estimate that the EPS of the company from 2020 to 2022 will be 1.33,1.80,2.40 yuan. For the first time, it will be given a "buy" rating of 35 times PE in 2021, corresponding to the target price of 62.96 yuan.
Risk hint
Real estate regulation and control exceeded expectations, developers were less willing to pay, business expansion was less than expected, and service quality declined.