Brief comment on performance
In the first half of 2017, the company realized operating income of 2.159 billion yuan, down 5.90% from the same period last year, and realized net profit of 590 million yuan, down 20.22% from the same period last year, or 0.25 yuan per share. The performance is in line with expectations.
Business analysis
Toll income dropped slightly, resulting in differences in different road sections: in the first half of 2017, Jiangxi-Guangdong Expressway realized traffic service income of 1.47 billion yuan, a slight decrease of 2.18% compared with the same period last year. If you take a closer look at the eight expressways that are mainly operated, due to the different effects caused by the new opening roads around, the income growth rate has been divided. Jiujing, Changtai and Penghu benefited from the improvement of the road network, and traffic revenue increased by 9.5%, 15.2% and 87.9% respectively compared with the same period last year. However, affected by the opening of Changjiu Avenue and Dongchang Expressway, the income of Changjiu, Changzhang and Wenhou peers decreased by 8.8%, 13.0% and 41.2% respectively compared with the same period last year. In other industries, due to the rise in the unit price of oil products, the sales revenue of oil products increased by 3.8% compared with the same period last year; due to the slowdown of the company's highway construction, the number of engineering projects decreased by 23.3%.
A number of costs reduced, gross profit margin increased significantly: the company reduced a number of costs in the first half of 2017. Among them, the cost of road maintenance is reduced by 20 million yuan; after the total traffic flow is re-forecasted, highway depreciation and amortization is reduced by 37 million yuan; in addition, due to the reduction in business, the cost of engineering and real estate sales is reduced by 48 million yuan and 47 million yuan respectively. The company recorded operating costs of 1.242 billion yuan, down 11.1% from the same period last year, with a gross profit margin of 42.5%, an increase of 3.4pts over the same period in 2016 and an increase in profitability.
Deducting non-net profit increased by 17.6% compared with the same period last year, and the cash flow is abundant: the net profit of returning to the mother in the current period has declined significantly, mainly because the company made an investment income of 550 million yuan from the sale of shares in Guosheng Securities in the same period last year, but there is no such income this year. If non-recurrent profits and losses are not taken into account, the company deducts non-net profits of 340 million yuan, an increase of 17.6% over the same period last year, and the main business has grown steadily. In addition, expressways are mostly cash transactions, and the flow is large, making the company's cash flow abundant. In the first half of 2017, the net operating cash flow was 1.369 billion yuan, an increase of 90.2% over the same period last year, accounting for 63.4% of operating income. Operating cash flow is in the forefront of the industry.
Investment suggestion
With the completion of the expansion of the company's core road production from four to eight, the toll life is expected to be extended, benefiting from the recovery of the economy, the growth of vehicle flow, the stable growth of traffic income in the future, and the guarantee of profitability. The company holds rich financial assets and land resources, and will continue to cultivate finance, tourism and other fields. The performance incentive scheme ensures the long-term and sound development of the company. It is estimated that the EPS of 2017-2019 will be 0.39ax 0.38 per share, corresponding to the PE of 15-15-13. At present, the highway industry PB1.7 times, the company PB0.99 times, is still in a clean state, the valuation advantage is obvious, will continue to repair. Maintain a "buy" rating.
Risk hint
The overall macroeconomic growth rate is in the doldrums, and the traffic volume is not up to expectations.
