A brief comment on the event
On May 12, the company won the bid "General contract for investigation, Design and Construction of Municipal Road Engineering on the six Banks of three Rivers in Jinping County" and "General contract for Survey, Design and Construction of Municipal Road Construction Project from Jinping County to Maoping"
The total investment of the two EPC projects is 500 million yuan respectively, and the construction period is 20 months.
Business analysis
At present, the valuation is on the low side, and the performance of sufficient on-hand orders continues to increase: 1) ① won 22 contracts in 2016, with a total contract value of 4.318 billion yuan, a sharp increase of 62.05% over the same period last year. From 2017 to now, ② has won the bid with a contract amount of 2 billion yuan and signed two investment intention agreements, totaling 10.4 billion yuan. One of them is the PPP project framework agreement signed by the company on April 15 for the first phase of urban reconstruction in Luqiao District, Taizhou City (including Shanghe Map during the Qingming Festival). The amount is as high as 10 billion (3.3 times of 2016 revenue). ③ we expect that at least half of the intention agreement will be landed this year, but we conservatively estimate that the newly signed orders for 17max will reach 7312 billion yuan respectively in 18 years, and the proportion of orders with high gross margin such as PPP/BT will increase significantly. As the company's high gross margin projects enter the carry-over period, the company's performance is expected to be greatly boosted. 2) We estimate that the company's return net profit for 2017-2019 will reach 3.14 million, respectively, and the performance growth rate will be as high as 274%, 93%, 33%, respectively. The current market capitalization of 7.3 billion corresponding to 2018, 2019, PE valuation is respectively times 23-12-9, PEG valuation is only about 0.1, the company currently has total assets of 7.3 billion, net assets of 4.6 billion, asset-liability ratio of only 41% and only 1.57 times. In the construction sector, it is the lowest among listed companies of the same volume.
The assets are high quality and there is still room for improvement: 1) there is no doubt that the company's assets are excellent at the moment and its security is high:
At the end of 2016, ① had 2.12 billion of its net assets (46.2%), and Tengda Construction / Longyuan Construction / Hongrun Construction accounted for 35.4% / 9.9% of current assets respectively, compared with Tengda Construction's cash adequacy. The company's asset-liability ratio in 2016 was 41.3%, which was lower than Longyuan Construction's 80.0% and Hongrun Construction's 79.0%. The proportion of accounts receivable to current assets of ② Company from 2014 to 2016 is 10.3%, 8.8% and 9.0% respectively, which shows an obvious downward trend, and the provision for bad debts is only 145 won, 2.9 million, 7.7 million respectively, which proves that the quality of accounts receivable is high. Because most of the company's BT/PPP projects are located in the southeast coastal provinces, the risk of bad debts is not high. ③ 's inventory accounts for 71.1%, 71.0% and 51.3% of current assets from 2014 to 2016, respectively, with an obvious downward trend, and the provision for inventory decline in 2015 and 2016 is 336510 million respectively. The risk of real estate asset price decline has been released. 2) there is still a margin of improvement in asset quality in the future: the company's inventory of Kunming / Taizhou / Yichun real estate projects totaled 2.7 billion at the end of 2016. according to Jiwu.com statistics, the price of second-hand housing in Taizhou / Kunming / Yichun rose 2.6% in April compared with the previous month. With the volume and prices of the real estate market in third-and fourth-tier cities rising, we expect that the company's real estate inventory is expected to bring an excessive cash inflow to the company. 3) PB valuation is on the low side: the PB valuation of Tengda Construction / Longyuan Construction / Hongrun Construction is 1.57 / 2.21 / 2.36 respectively, and the PB valuation of China Power Construction / China Communications Construction is 1.99 / 1.75. When the net profit growth of Tengda Construction / Longyuan / Hongrun Construction reaches 271% / 93% in 2018, the valuation is on the low side from the point of view of PB.
Actively lay out the second main business of hydrogen energy: 1) hydrogen energy is the second main industry for the first time after the listing of the company, inspecting the hydrogen energy industry for nearly 3 years; 2) High starting point: Chunhua hydrogen energy has the core technology of water hydrogen production, the core technology comes from experts from the Aerospace Design Institute; 3) the layout of hydrogen energy is strong: set up a 10 billion hydrogen energy industry fund, build Taizhou hydrogen energy industry city, and take the lead in holding the international hydrogen energy exhibition summit. 4) the future layout will continue to be in depth, and international mergers and acquisitions and the introduction of the most advanced foreign technology or the establishment of overseas research platforms will not be ruled out.
Investment suggestion
Give the company a target price of 7-8 yuan in the next 6-12 months, corresponding to a 17-year PE valuation of 35-40 times.
Risk hint
The landing of PPP is not as expected and the development of hydrogen energy industry is slow.