Sina tip: This is a research report column, which is only an analyst's personal views and opinions on a stock, not a formal news report. Sina does not guarantee its authenticity and objectivity. All effective information about the stock is subject to the announcement of the Shanghai and Shenzhen Stock Exchanges. Investors are respectfully advised to pay attention to the risks.

　　 Changjiang Securities

Event description:

The company today announced its report for the third quarter of 2012: the operating revenue in the first three quarters was 319.557 billion yuan, down 4.83% year on year; The operating profit was 5.96 billion yuan, up 16.76% year on year; The net profit attributable to shareholders of the listed company was 4.273 billion yuan, up 17.81% year on year; The diluted EPS in the first three quarters was 0.2 yuan, and the diluted EPS in a single quarter in the third quarter was 0.09 yuan.

Event comment:

The company's performance continued to recover. The single quarter revenue of the third quarter was 121.243 billion yuan, up 7.40% year on year. The revenue growth continued to rise and turned positive from negative; The net profit in a single quarter was 1.882 billion yuan, up 65.11% year on year, slightly slower than that in the second quarter, but still higher. We believe that there are three main reasons for the performance recovery. First, with the resumption of railway and other infrastructure construction, the company's infrastructure business rebounded; Second, the company's off road market growth; Third, the gross profit rate of the company increased.

Profitability was improved and expenses increased during the period. The gross profit margin of the company in the first three quarters was 10.27%, up 1.07 percentage points year on year. We believe that the reason for the increase in gross profit margin is not only the decrease in raw material costs to reduce project costs, but also the decrease in the proportion of businesses with low gross profit such as railway construction. We judge that with the stabilization of material prices and the recovery of railway infrastructure orders, the company's gross profit rate will remain stable. The sales expense rate, management expense rate and financial expense rate of the company were 0.38%, 4.05% and 1.08% respectively, with a slight increase year on year.

The company's payment collection has improved significantly, with a cash to income ratio of 102.74%, up 9.4 percentage points year on year. The net cash flow from operating activities was -12.468 billion yuan, and the net outflow amount decreased by 49% year on year. The company's liabilities continued to rise, with the asset liability ratio reaching 83.66% and the proportion of interest bearing debt in investment capital rising to 70.43%.

Off road contracts continued to grow, and new contracts continued to recover. The company signed new contracts of 450.6 billion yuan in the first three quarters, up 26% year on year, and 160.2 billion yuan in a single quarter, up 34.62% year on year. In the first three quarters, municipal and other projects signed 212.9 billion yuan, a year-on-year increase of 46.9%; RMB 115.45 billion was newly signed in real estate and other sectors, up 65.29% year on year; The survey and design, industry, railway, highway and other sectors all declined slightly. By the end of the third quarter, the company's orders in hand reached 1.17 trillion yuan, up 19% year on year, including 944.399 billion yuan for infrastructure orders, up 10.42% year on year.

With the gradual recovery of railway and other infrastructure investment, the company's infrastructure orders are expected to continue to grow. At present, there are sufficient orders in hand, and the sustainability of performance recovery is guaranteed. It is estimated that the diluted EPS in 2012 and 2013 will be 0.32 yuan and 0.35 yuan respectively, corresponding to 8 times and 7 times of PE, which will be rated as "prudent recommendation".

get into [Sina Finance and Economics] discuss