Longyuan Construction (600491) one of the in-depth series of reports: Compliance is the king, professional wins, and Longhua is in pursuit of the wind

Longyuan Construction (600491) one of the in-depth series of reports: Compliance is the king, professional wins, and Longhua is in pursuit of the wind
Report Summary: We believe that the company ushered in a strategic inflection point in 2014 and entered the PPP market, steadily transformed its PPP investment and financing operation service providers, and strongly promoted performance growth and structural optimization. The current performance growth is fast, the profit is steadily increased, the cash flow is negative, but the room for improvement is large, the interest rate is lower than the level of the industry, and the capital is abundant; the company grew up in Ningbo, stronger than Shanghai, and cultivated the Jiangsu, Zhejiang and Shanghai market for nearly 40 years.At present, the business is still concentrated in the Yangtze River Delta region, and it is expected to fully benefit from the implementation of the national strategy of regional integration; the company is one of the most professional PPP social capital, generating three significant businesses of first-mover advantage, professional advantage and ecological advantage.Advantages, professional abilities and concepts gradually transition to the entire industrial chain before the transition; the company’s PPP project reserves are abundant, reorganized into the warehouse and is in the implementation stage, and has a good operating foundation; the company adheres to the business style of compliance as the king, and is now more stable and businessThe performance exceeds the market; the company has the ability to respond to the three major challenges faced by private enterprises in their PPP business and achieve healthy development; the PPP market will grow steadily in continuous regulation.Under the policy tilt, market share will increase, and factors such as the introduction of PPP regulations are expected to become a benign industryCatalyst; Differences from market views: The market generally underestimates the positive impact of companies’ professional compliance advantages on business.With reference to the most prudent attitude of its peers when undertaking business, the company has not returned projects in a tight credit environment, has not voluntarily abandoned projects, has not shown significant changes in performance, and has a very high project warehousing rate, and most of them are in the implementation stage; The market generally underestimates the operability and investment income scale of PPP projects undertaken by private enterprises, and overestimates the government’s estimated proportion of private enterprise projects.We believe that the company’s PPP investment income in 2018-2020 can reach 5.500 million / 15.800 million / 24.200 million, gross profit margin tends to about 40%.The company owns about 15 billion projects in the fields of medical, education, sports and other vertical people’s livelihood facilities, and has an operating profit margin advantage over the market. The market generally has excessive doubts about the impact of the PPP model and the prospects of PPP private enterprises. The overall attitude is neutral and pessimistic.We analyzed the five points that Vinci put forward for PPP companies. We believe that the PPP business does have a long-term imagination space, which can steadily promote performance, improve overall profitability, contribute to higher quality cash flows, and achieve healthy financial conditions and higherMarket recognition; investment strategy: We have established the company’s 2015-2020 PPP project schedule model to predict PPP construction revenue over the years, achieved a better review of construction revenue from 2015-2017, and forecasted revenue from 2018-2020.It is estimated that the company’s operating income from 2018 to 2020 will be 224 trillion, 260 trillion and 281 trillion, so the revenue will be 0.6 yuan, 0.79 yuan and 0.95 yuan, corresponding to 14 for PE.7X, 11.2X and 9.3 times.By comparing 9 expected PPP garden private enterprises, we think the current company’s reasonable estimate 重庆耍耍网 is 18 times, corresponding to 10.81 yuan / share, raised to “strongly recommended” level. Risk warning: PPP policy risks, orders fall below expectations, financial risks.