Deeply cultivate the supervision industry in many fields, covering the engineering project management service industry chain at multiple points
The company is the first listed company among supervisory companies in various fields. The company currently has 6 Class A qualifications in 14 supervision fields, and 3 Class A qualifications in the field of bidding agency and consulting. Since 2012, engineering supervision revenue has ranked in the top 10 of nearly 80,000 supervisory enterprises in the country for many years in a row, leading the engineering supervision industry.
The communications supervision industry is well organized, and revenue conversion is expected to accelerate
The overall revenue of the communications supervision industry has certain cyclical characteristics. The initial operators that issue 3G and 4G licenses will invest a lot, while the final investment will decrease. The company has great brand advantages and marketing network advantages in the communications supervision industry, and is in a leading position in the industry. At the end of 2017, the company signed a large-scale communication supervision service framework agreement with China Mobile, but it was plagued by the late 4G stage, and the revenue from the conversion of this framework agreement in 2018 was not obvious. As the Ministry of Industry and Information Technology issued 5G licenses in June of this year, and various provinces and cities issued 5G industry development outlines, 5G infrastructure is in high demand. China Mobile clearly proposed that it will build more than 50,000 5G base stations in 2019 and achieve 5G commercial services in more than 50 cities. The company's large-scale framework contract conversion revenue will accelerate. It is expected that it will be quickly implemented into orders and converted into revenue in 19 and 20.
Gross margins in other supervisory fields such as housing construction are rising year by year, and 5G promotion is rich in application scenarios
Thanks to the improvement of the company's business capabilities, continuous expansion of popularity, and continuous strengthening of cost management, the company's gross profit in housing construction and other supervisory fields has been rising year by year in recent years, from 22% in 2015 to 32.35% in 2018, a significant increase. In the future, the promotion of 5G will lead to the rapid development of animal networking and artificial intelligence, thereby bringing rich application scenarios to housing construction supervision and greatly improving supervision efficiency. For example, “smart supervision” based on technologies such as 5G and the Internet of Things is applied in construction site project safety management, critical project management, project labor management, etc.
The supervision industry has broad prospects, and the company integrates across the industrial chain to build a large-scale comprehensive supervision company nationwide
Benefiting from national policy support, the supervision industry has broad prospects, but the number of large-scale comprehensive supervision companies in the industry in the country is only a handful, and the number of enterprises with revenue exceeding 100 million in the industry accounts for only 2.2%. Through the acquisition of Hongmin Electric Power and Shunshui Supervision within the supervision industry, the company successfully entered the top four supervisory fields with market share in the supervision industry, and vertically obtained subsidiaries in the fields of consulting, software development and contract construction through new establishment and mergers and acquisitions. At the same time, it also signed a series of “strategic cooperation agreements” with high-quality enterprises in the industry to achieve the goals of large-scale comprehensive supervision enterprises nationwide as soon as possible.
Investment advice
The issuance of 5G licenses and commercialization of 5G will release a large amount of demand for 5G infrastructure, and the large framework contracts signed by the company are expected to be implemented into orders and quickly converted into revenue. At the same time, the company is speeding up the integration of the horizontal and vertical industrial chain, successfully entering the field of power and hydraulic engineering supervision, acquisition consulting, contract construction, etc. The company's qualifications are constantly increasing, its market share is constantly increasing, and its business scope continues to expand. New smart supervision scenarios will be added after 5G is officially commercialized, and the company is also actively developing a “smart supervision system.” The company's EPS for 2019-2021 is expected to be 0.47, 0.61, and 0.76 yuan/share. The corresponding PE is 38, 30, and 24 times. First coverage, given an “increase in holdings” rating, the target stock price was 22 yuan/share.
Risk warning: 5G infrastructure investment may fall short of expectations due to environmental impact; new acquisition business performance may fall short of expectations due to poor integration; the company's customer concentration is high, and bargaining power and collection will be affected.