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China Engineering International (002051): Excessive Belt and Road Airway Marker

China Engineering International (002051): Excessive Belt and Road Airway Marker

Guide to this report: The performance exceeded expectations due to lagging performance of some projects / restructuring of gross profit margin; too many orders in hand, and the Belt and Road Initiative helped speed up the implementation of orders; the acquisition of high-quality design assets of the controlling shareholder, the estimated position is still low, and the level is increased to increasehold.

  Investment Highlights: Increase rating to increase holdings.

2018 revenue of 10.2 billion (-7%) and net profit of 1.2 billion (-19%) were lower than expected, due to forced lag / gross margin drift of some projects, lowering EPS1 for 2019/20.

26/1.

43 (Original 1.

68/1.

85 yuan), a growth rate of 17% / 13%, forecast EPS1 in 2021.

60 (+ 12%), the Belt and Road Initiative will help speed up / expected order performance, given in June 2019.

6 times PE, raise target price by 20.

9 yuan (originally 12 yuan), increased holdings.

  For some projects, forced lags have dragged down performance, and operating cash flow has improved.

1) The performance in 2018 was lower than expected, due to the compulsory lagging revenue / gross margin of some overseas projects, Q4 revenue was 2.3 billion, Q1-Q4 growth rate was 38% / 22% / 24% /-52%; net profit 2.

6 billion, Q1-Q4 growth rate of 10% / 24% /-2% /-59%.

2) Gross profit margin 19.

3% (-6.

9pct), net interest rate 11.

6% (-0.

9pct).

3) Operating cash flow is +2.8 billion (2.5 billion in the previous year), and foreign exchange collection is better.

4) Financial expenses -1.

500 million (+4 the previous year.

500 million) is due to exchange gains.

  With sufficient orders in hand, the Belt and Road Initiative hopes to accelerate the 杭州桑拿 performance of orders.

1) New contracts signed in 2018 amounted to approximately 14.9 billion (-10%), and overseas / domestic growth rate was -8% /-27%. At the end of the year, overseas contracts were in balance at approximately 60.3 billion (+ 5%), and the order protection multiple was 5.

9 times.

2) Newly signed overseas contracts accounted for 93% in 2018, and newly signed Azerbaijan Iron and Steel Complex Construction Project (11.

(US $ 700 million) is the largest project successfully developed by the company along the Belt and Road countries, and the Belt and Road is highly relevant.

3) About 6.2 billion (-7%) contracts entered into force in 2018. The second Belt and Road Summit will re-enter the first developer conference to help speed up the implementation of orders.

  Acquisition of high-quality design assets of controlling shareholders, estimates / positions are still low.

1) Acquiring the respective high-quality engineering design assets of the controlling shareholders (China Yuan, transaction price 12).

700 million), usually selected as ENR’s top 60 Chinese engineering design enterprises for 14 consecutive years, and has unique advantages in the fields of medical construction / airport logistics / passenger ropeway.

2) It is predicted that the net profit growth rate in 2019 will be 17%, corresponding to only 13 times the PE, and the Belt and Road peak penetration will obviously stagnate.

3) Fund positions at the end of 20183.

29%, lower than the high before the first summit (11.

42%).

  Risk Warning: The Belt and Road Summit’s Outcome Is Less Than Expected

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