Events:

The company released its 2018 semi-annual report on August 20, 2018.2018. In the first half of 2018, the company realized operating income of 7.66 billion yuan, an increase of 16.31% over the same period last year; net profit of 111 million yuan, an increase of 12.04% over the same period last year; and deduction of non-homed income increased by 33.66% over the same period last year.

Viewpoint:

1. Market dimension: regional architectural leaders are expected to seize the opportunity of the Great Bay area and re-enter the high-speed growth channel.

The company is a leader in the regional construction industry. The company has more than 60 years of construction history, ploughing the Ningbo market, participating in all stages of regional architectural development, building a large number of landmark buildings, enjoying high brand awareness and reputation. During the reporting period, the company's business was still mainly carried out in Zhejiang Province, accounting for 82.6% of revenue in Zhejiang Province and 69.6% in Ningbo, up from 76.1% in 2017.

The company is located in the core area of Dawan District, Zhejiang Province, and is expected to fully benefit from the planning and construction of Dawan District. Zhejiang Greater Bay area is expected to become the second national Greater Bay area. After 2017.12 put forward the orientation and clear timetable for the construction of the Great Bay area, the leading Group for Planning and Construction of the Great Bay area in 2018.8 was set up. In the recent public strategic planning, it is proposed that a total of 70 transportation projects will be promoted in the next five years, with an estimated total investment of about 1 trillion yuan and a planned investment of about 750 billion yuan in five years, of which 44 major projects will be promoted in 2018. The company closely follows the market and actively intervenes. During the reporting period, the Ningbo Hangzhou Bay New area Xingci Road Bridge Project across the 11th Tangjiang River (winning bid price 104 million yuan), the Zhongnan-Greenland Yuyao A4 site bid project (winning bid price 217 million yuan), Yuyao Zhongchun high-tech energy-saving and environment-friendly concrete precast pile project factory building project (winning bid price 61 million yuan), Cixi Fangtai kitchenware kitchen electricity expansion project part of the steel structure project (winning the bid price totaling 21.72 million yuan) and other projects.

two。 Business dimension: the layout of the whole industry chain, the steady growth of core business drives the overall performance

The company has formed a whole industry chain layout. The company's business covers design, construction, building materials, architectural research and other industrial chain links, the current formation of construction, decoration curtain wall, municipal engineering as the core of the seven business plates. Each subdivided industry has the effect of coordinated development, and the overall benefit is increasing day by day.

During the reporting period, the core business blossomed and grew steadily, driving the overall performance of the company. Company 2017 and 2018H1 newly signed orders 22.7 billion / 10.1 billion, an increase of 23.5% over the same period last year, accounting for 20.3% of the current income, respectively. In the first half of the year, the newly signed orders for the three major businesses of housing construction / installation / decoration increased by 28%, 45% and 533% respectively compared with the same period last year. Abundant orders on hand promoted the steady growth of the company's core business. During the reporting period, the proportion of the company's housing construction / municipal / installation business was 53%, 21%, 10%, respectively, ranking in the top three. The year-on-year growth rate was as high as 17%, 27%, 83%, respectively, driving the company's overall revenue growth as expected, achieving revenue / return net profit of 7.66 billion / 111 million, an increase of 16.31% 12.04% over the same period last year.

3. Financial dimension: gross profit margin increased significantly in the second quarter, and the overall profit level remained stable in the first half of the year.

The company's gross profit margin in the second quarter was 9.39%, which was nearly 1.0 / 3.3 pct higher than that of 2017H1/2017, and 3.4 pct higher than the previous year. It was judged that the main reason was that part of the transportation expenses of Guangtian components, a subsidiary, was converted from operating costs to sales expenses. Accordingly, the rate during the second quarter was 5.99%, which was nearly 1.4 / 1.5 pct higher than that of 2017H1/2017, and 2.5 pct higher than that of the previous year, of which the sales / management / financial rate was increased by 0.2 / 1.1 pct respectively.

The company's net interest rate in the first half of the year was 1.48%, a slight drop of 0.05pct compared with the same period last year, which was the same as that of 2017. During the reporting period, the company's profit level remained stable.

Conclusion:

During the reporting period, the company continued to dig deep into the Zhejiang market, actively acquired construction projects in the Greater Bay area, and gave full play to the business synergy of the layout of the existing industry chain, with a year-on-year growth rate of 20% over the same period last year, keeping the order-to-income ratio at a high level. promote the company's core business to blossom and grow steadily, drive the overall performance, and keep the profit level stable. We believe that in the future, the company will continue to benefit from the development of the Greater Bay area based on its regional leading position in order to maintain the speed of taking orders. It is estimated that the company's operating income from 2018 to 2020 will be 17.414 billion yuan, 21.212 billion yuan and 25.066 billion yuan respectively, and its earnings per share will be 0.25,0.28,0.31 yuan respectively, corresponding to PE 15.9x, 14.1x and 12.6x respectively.

Risk hints: macroeconomic fluctuation risk, raw material price fluctuation risk