China Railway (601390) In-Depth Tracking Report: Rail Track Spring Wind Is Rising, Income Structure Gets Better
The railway has entered a new year of completion, and after the restart of the urban rail plan, the boom will continue.
We expect that the company’s railway and urban rail orders will gradually pick up in 2019, and the acceptance of municipal orders will gradually realize the revenue, and the gross profit margin will continue to improve.
We maintain our 2018-20 profit forecast and the corresponding EPS is 0.
88 yuan, giving the company 11 times PE in 2019, corresponding to a target price of 8.
8 yuan, maintain “Buy” rating.
One of the world’s largest construction engineering contractors: rooted in railways, full bloom.
Since its establishment in 1950, the company has participated in two-thirds of China’s railway construction with railway engineering as its main business. At present, its business covers almost all infrastructure areas (railroad, highway, urban rail, municipal engineering, housing construction, etc.), among which railway / cityRail construction market share is above 45% all 佛山桑拿网 year round.
Structurally, railway / municipal / urban rail / highway is the main sector of infrastructure business. In 2018, the proportion of railway / municipal / urban rail / highway orders accounted for 17 respectively.
7% / 44.
8% / 16.
5% / 21.
0%, constant, municipal and urban rail sectors have become a new driver of growth in infrastructure orders.
Railway investment remained at a high level, and the boom of the urban rail transit boomed, and the municipal PPP started again.
National infrastructure is expected to recover moderately at around 8% in 2019, with improvements in various sub-sectors, among which railways, urban rails and municipalities are the sectors with better growth.
1) In 2019, the railway is expected to take the lead in the overall recovery of the infrastructure sector: from the policy 杭州夜网论坛 surface, railways are the direct investment infrastructure of the central government. In the environment of limited leverage for preventing local hidden risks and solving the problem of corporate leverage, the central government may have financial overweight.In a better direction, it is expected that railway investment will maintain a high level of more than 8,000 ppm. From the perspective of construction planning progress, only an increase of 21% in the “13th Five-Year” operating mileage plan will be completed in 2016-17, and about 1 will be completed in 2019-2020.
70,000 kilometers, accounting for 56% of the total traffic mileage during the “Thirteenth Five-Year Plan” period. We believe that 2019-20 will be a year of railway completion and investment. Railway projects under construction will accelerate construction.
2) The city rail planning plan was approved to restart, and it still maintained a high degree of prosperity midway: in terms of new mileage, the total operating mileage CAGR of the city rail in the next three years is expected to be 18%; in terms of cost, the cost per kilometer will steadily increase, and the city rail is expected to increase in the next three yearsThe cost per kilometer is 800-900 million, and we estimate that the total investment in urban rail will be about 3 in the next three years.
2 trillion, of which about 1 trillion in civil investment.
3) Through the detailed advancement of the “remediating shortcomings” and the PPP is ready to go after the supervision and regulation, the municipal engineering is expected to gradually pick up in 2019.
Three major advantages help the company lead the infrastructure and benefit from the high structural prosperity of the infrastructure.
1) Leading qualifications and technology, laying down half of the country’s urban rail.
The company has 18/17 top-level qualifications for railway / city rail construction, ranking first in the industry. Technically, it has 3 national key laboratories. Under the environment of increasing railway bridge-tunnel ratio and rapid development of urban rail, the company is building railways.The advantages of the tunnel spindle technology will enhance the competitiveness of the acquisition project.
With qualified technical advantages, the company has participated in the construction of more than 60% of national railways and urban rails.
2) The proportion of high-margin business income such as urban rail and municipal services has increased year by year, and the optimization of the business structure has promoted the company’s infrastructure business gross profit margin to steadily increase.
3) The company makes full use of the capital market for financing, and the financial expense ratio and capital cost are low in the industry.
With the above advantages, the company is competitive in railway, urban rail and municipal construction, and can fully benefit from the current high prosperity of the infrastructure structure.
Railway rail orders are expected to meet the turning point, and the company’s gross profit margin continues to improve.
For the “14th Five-Year” railway construction planning, we believe that the amount of bidding will reverse the trend since 2016 and it is expected to pick up. Railway orders are expected to grow steadily in 2019. Benefiting from the intensive planning approval since the second half of last year, orders in 2019 are expected to be in succession.It is expected that the turning point of urban rail order orders will pick up in 2019; combined with our expectations of steady increase in highway and municipal orders, it is expected that the company’s infrastructure order growth rate will increase in 2019.
At the same time, the conversion of existing municipal orders will gradually realize the revenue, the proportion of municipal business revenue will continue to increase, and the gross profit margin of infrastructure will continue to improve.
In addition, the advancement of debt-to-equity swaps will provide more positive growth momentum. Combined with the company’s steady increase in orders, sufficient orders in hand and improved gross margin, we expect the company’s performance to grow steadily.
The bidding volume of railways and urban railroads fell short of expectations, and the debt-to-equity swaps fell short of expectations.
Earnings forecasts, estimates and investment ratings.
The railway and urban rail industry are expected to meet the point in 2019. The railway enters the year of completion. The urban railroad will continue its high prosperity after the planned restart.
We expect that the company’s railway and urban rail orders will pick up in 2019. Municipal orders received in the past will gradually realize the revenue, improve the quality of revenue and increase performance.
Taking into account the dilution of debt-to-equity equity in 2019, we maintain our 2018-20 profit forecast and the corresponding EPS is 0.76/0.
With reference to the assessment level of similar companies, we give the company 11 times PE in 2019, corresponding to a target price of 8.
8 yuan, maintain “Buy” rating.