Event

The company announced that it intends to set up a subsidiary in Russia through its wholly-owned subsidiary Poly Holdings (Singapore), with a registered capital of 20 million US dollars, mainly engaged in the investment, construction and maintenance of highway projects, as well as the production and sales of new asphalt materials.

Actively layout overseas markets in response to the "Belt and Road Initiative" strategy

The company is one of the few enterprises with competitive advantage in the domestic modified asphalt industry, and its technology and construction experience are not weaker than those of its international leading counterparts. Previously, the company has opened up markets in Algeria and other North African markets through cooperation with China Railway Construction and other companies. Based on the historical development opportunities under the national policy of "Belt and Road Initiative", we believe that the company will have more room for development by setting up a Russian subsidiary and starting to lay out overseas markets.

In terms of policy, the national level is creating a better diplomatic environment to encourage domestic enterprises to invest in developing countries along the Belt and Road, especially to promote excess capacity in steel, non-ferrous materials and building materials. In terms of the industry itself, the popularity of modified asphalt in developing countries is not high, such as Russia, Central Asia and other countries still use ordinary asphalt, and most of its pavement conditions are the same as those in the late 1990s, so there is a large market demand for modified asphalt in the future. From a time point of view, the current overseas expansion in addition to the company itself can undertake business, along with the domestic high-speed rail, infrastructure and other central enterprises to go abroad in large quantities, the company's chances of obtaining related supporting projects are also greatly improved.

The national layout is basically completed, and the domestic business is expected to usher in an inflection point.

Since its listing in 2010, the company has successively completed the business layout in Jiangsu, Jilin, Shaanxi, Hunan, Sichuan, Xinjiang, Tibet and other places, and will fully benefit from the investment in transportation construction projects in the central and western regions in the future. at the same time, the growing highway maintenance market in the central and eastern regions will also contribute to the company's business to a certain extent.

In 2014, due to fluctuations in crude oil prices, delayed implementation of orders and other non-recurrent factors, the company's profits showed negative growth. With the stabilization of low oil prices in 2015 and the normal implementation of some delayed orders, we expect the company's domestic business to usher in an inflection point in 2015 and earnings will resume growth.

Give a rating of "increasing holdings"

We estimate that the company's EPS for 14-16 years will be 0.13,0.27,0.37 yuan respectively, giving the "overweight" rating for the first time.

Risk Tip: the company's overseas business expansion is not up to expectations.