Longzhou shares is a highway passenger transport enterprise in Longyan City, and Zhaohua leads the way in entering the asphalt supply chain. Zhaohua reshaped the asphalt supply chain with asphalt box multimodal transport, and its performance is expected to grow explosively, giving it a "highly recommended-A" rating.
Fujian road passenger transport leader, mergers and acquisitions bigger and stronger. In 2003, Longyan Automobile Transportation Corporation was reorganized into Longzhou Stock. Since then, through continuous mergers and acquisitions, the company has gradually occupied a dominant position in Longyan and Nanping market, and the passenger transport network covers major cities in Fujian Province. As of 17H1, controlling shareholder Longyan Jiaotong State Investment holding 29.10%, the actual control is Longyan City SASAC; private enterprises Zhaohua Investment, Longzhou shares and Zhaohua leading employees hold 12.33%, 3.03% and 1.51% respectively, the ownership structure is balanced.
The merger and acquisition of Zhaohua leads to enter the asphalt supply chain business. In March 2017, the company acquired Zhaohua lead (50% cash and 50% equity consideration each) for 1.24 billion yuan (13.8X PE/3.8X PB for 16 years), entered the asphalt supply chain business, and raised 580 million yuan from major shareholders, Longzhou shares and Zhaohua leading employee shareholding plan to fully realize the binding of interests of all parties. Zhaohua leader has promised that the 16-18 year net profit will not be less than 0.85 trillion yuan, and 25% of the excess will be used to motivate management.
China's leading asphalt supply chain enterprises, logistics, trade, warehousing and processing three major businesses. Zhaohua takes the lead in promoting the "asphalt box + reservoir area" model in China, which requires only one loading and unloading and one heating, which is significantly lower than that of traditional tanker transportation. The company owns / leases asphalt warehouses and modified equipment in Tianjin, Shanxi and Hunan, and constructs three major business sectors: asphalt box multimodal transport, asphalt trade and e-commerce, and warehousing and processing.
Hundreds of billions of grade asphalt trade market, asphalt box multimodal transport shows its skills. The upstream of asphalt is mainly imported crude oil processing or direct import, the five eastern provinces account for more than 80% of the national output, while the downstream road asphalt accounts for the vast majority of demand, and there is a lack of alternatives. The investment in road construction in the western region has accounted for about 50% of the country's total, and there is a huge gap in asphalt demand, which is especially suitable for railway container multimodal transport. In 2016, the company's asphalt trade volume and asphalt box multimodal transport volume accounted for only 1.4% and 0.7% of the apparent consumption, and the permeability continued to increase.
Cover for the first time, giving a "highly recommended-A" rating. Asphalt box multimodal transport significantly improves the efficiency of asphalt supply chain, and is especially suitable for Chinese and Western minister distance transportation. The company promotes trade by logistics, and its performance has high growth with certainty. We predict that the company's EPS for 17-19 will be 0.48, 0.63, and 0.87 yuan, and the previous share price PE27.4/20.9/15.2X will be given a "highly recommended-A" rating for the first time.
Risk hints: decline in asphalt demand, increase in railway freight charges, business diversification management risk
