Gezhouba (600068): Construction and environmental protection business initially caused profits to exceed expectations.

Gezhouba (600068): Construction and environmental protection business initially caused profits to exceed expectations.
Performance review 2018 results exceeded expectations Gezhouba announced 2018 results: realized revenue of 100.6 billion US dollars, replacement range5.8%, realizing 合肥夜网a net profit of RMB 470,000, which will be extended by 0 every year.6%; In the fourth quarter of 2018, revenue reached 33.2 billion yuan, a year-on-year increase of 2.2%, achieving a net profit of RMB 190,000, which is more than ten years.7%; due to slow progress in overseas construction business and renewable resources business, performance was lower than our expectations.  The initial income in 2018 decreased, of which the construction and environmental protection business income decreased further4.3%, 27.2%, due to the implementation of scheduled replacements of some international projects and the significant changes in the renewable resources market under the background of Sino-US trade friction; and led to an increase in gross profit margin.3ppt, mainly due to strong growth in gross profit from cement doping upward (at least +76.7%); the total annual growth of assets and credit impairment losses increased by 990%, mainly due to the increase in bad debt losses and inventory depreciation losses; net profit margin was realized.6%, a year increase of 0.2ppt.  In 2018, the company’s net operating cash inflow was 1.3 billion US dollars, a significant improvement from the previous year’s net decrease of 8 trillion, which was mainly due to the improvement in receivables; the net expansion of investment cash expanded by 47 trillion to 139 trillion, mainly due to the increase in PPP investment and foreign investment.  Development Trends Construction business signings and revenues are accelerating.Newly signed contracts for construction in 2018 totaled 232.1 billion yuan, one year -1.3%, including multiple territorial / foreign projects +1.1% /-5.6%, double for hydropower / non-hydropower projects +25.5% /-6.7%.The company plans to sign 232 billion new contracts in 2019, implying a slight increase over the years4.0%.We believe that the domestic infrastructure recovery is underway in 2019, the international environment is stabilizing, and the company’s new construction contracts and revenue recognition are expected to accelerate.  The investment business is expected to continue strong.In 2018, the company’s highway / water investment business income increased by 20 respectively.4%, 91.2%, continued strong.The company’s investment plan for 2019 is USD 81.9 billion, which implies an increase of 54% over many years. It also proposes that the highway business can improve the integrated management capability and the water business can expand its merger and acquisition efforts.We expect to gradually stabilize the domestic PPP market, and the company’s investment business income is expected to continue to grow strongly.  Earnings forecast Due to the worse-than-expected progress of the construction and environmental protection business, we have lowered our net profit forecast for mothers in 201910.6南宁桑拿 % to 50.700 million, meanwhile, the net profit forecast for 2020 is 55.300 million.  It is estimated and suggested that the company currently can sustainably correspond to July 2019.4x P / E (based on EPS after excluding perpetual debt interest).We maintain our “Recommended” rating and target price of 8.9 yuan, corresponding to September 2019.1x P / E, implying 23% space.  The progress of risk environmental protection business was slower than expected, and the recognition of PPP revenue was slower than expected.