Main points of investment
Seawall construction overall planning document issued, PPP continued to land at a high speed, the company's main business to meet important development opportunities.
The National seawall Construction Plan issued by the National Development and Reform Commission and the Ministry of Water Resources in August 2017 proposes that in about 10 years, the length of the national seawall will reach 15000 km, with an additional 2361 km of seawall up to the standard, of which 1931 km of seawall will be strengthened and 430 km of new seawall will be built. the rate of reaching the standard has increased from the current 42.5% to 57.1%, which will bring important opportunities for the development of the company's main industry. According to the latest statistics of Mingshu data, the cumulative transaction volume of PPP in China increased by 56.8% from January to August compared with the same period last year, with an increase of 96.4% in August over the same period last year. As one of the leading enterprises of seawall engineering in China, the company actively grasps the policy of PPP and seawall industry, and the follow-up orders are expected to continue to break through.
A substantial increase in newly signed orders, investment projects into the buyback period is expected to accelerate performance growth. The company's performance increased by 69% in the first half of 2017 compared with the same period last year, mainly due to the increase in settlement income and the increase in gross profit margin. The net profit from January to September is expected to be 5621-70.25 million yuan, an increase of 100%, 150% over the same period last year, showing a significantly accelerated growth trend. Since 2017, the company has announced that the bid-winning order is 4.574 billion yuan, a substantial increase of 62% over the same period last year.
From 2016 to 2017, the total bid-winning orders totaled 7.8 billion yuan, 3.6 times the 2016 revenue, of which 5.6 billion yuan was for the PPP project. Sufficient orders laid a solid foundation for the sustained and rapid growth of the main business. It is expected that a number of BT projects will enter the buyback period in 17-18 to contribute to investment income, which is expected to accelerate performance growth. From 2016 to 2017, major shareholders and senior executives continuously increased their holdings / subscriptions totaling about 2.3 billion yuan, fully demonstrating their confidence in the future development of the company.
Plan to increase income and purchase millennium design, and the layout of the industrial chain is expected to be further improved. The company announced that it intends to purchase 88.23% of the shares of Millennium Design by issuing shares and paying cash from 31 other parties, such as Millennium Investment and Ningbo Dongqian, with a consideration of 881 million yuan for shares and 548 million yuan for cash, with a total price of 1.429 billion yuan. and raise 574 million yuan for matching funds. The Millennium Design commitment 2017 / 2018 / 2019 net profit of deducting non-return is not less than 0.96 / 160 million yuan respectively. Millennium Design has a relatively complete qualification in the engineering design consulting service industry, and the completion of this merger and acquisition will help the company to further extend and improve the upstream and downstream industrial chain and accelerate the transformation of the company's business model from construction general contracting to engineering general contracting.
The layout of the second main business is becoming more and more perfect, and the field of pan-entertainment is becoming more and more popular. The company announced the establishment of Beijing Orange Lexin Entertainment Media Co., Ltd. in 2016, and announced a 5% stake in the film "Blood of the Machine" jointly invested with Oneness Pictures. The second main business has taken a substantial step forward. The film, directed by Zhang Lijia and starring Jackie Chan, is expected to be released on December 22, 2017. The announcement invested 110 million yuan to acquire a 41% stake in Beijing Juguang Picture Technology. Founded in 2012, Juguang Pictures is China's leading film and television special effects production company, has participated in the production of "Wolf Warriors", "Wolf Totem", "outsmart Tiger Mountain" and other works, and has maintained long-term and close cooperation with many famous directors, producers and production companies at home and abroad, such as well-known actor and director Wu Jing as its shareholder. The company continues to improve the layout of the second main business of pan-entertainment, with the goal of building a tool chain provider for the media industry and being a "water seller next to a gold mine", which is expected to blossom and bear fruit gradually.
Investment suggestion: we estimate that the company's return net profit from 2017 to 2019 is 1.51 PE 4.11 / 571 million yuan respectively, corresponding to 0.14 PE 0.34 Universe 0.47 yuan (2018-2019 consider consolidation and additional dilution), the company reported holding cash and financial management totaling about 3 billion yuan, excluding cash, the corresponding PE is 30 times of 2018, and the total market value after the target IPO is 15.3 billion yuan. Corresponding to the target price of 12.67 yuan, buy rating.
Risk hint: the risk of failure of the acquisition plan, the risk that the project schedule is not up to expectations, the BT project payback is not up to the expected risk, and the second main business expansion is not up to expectations.