Event: the company released its semi-annual report for 2021, with revenue of 3.185 billion yuan in the first half of 2021, an increase of 22.5% over the same period last year; net profit of 1.06 billion yuan, an increase of 35.7% over the same period last year; and net profit of 770 million yuan, an increase of 8.0% over the same period last year.
Steady growth in performance and good profitability. In the first half of 2021, the company's revenue grew steadily, up 22.5% over the same period last year, of which sewage treatment revenue was 1.84 billion yuan (+ 25.2%), accounting for 57.8%; tap water supply revenue was 810 million yuan (+ 16.4%), accounting for 25.4%. The simultaneous growth of revenue from the two main businesses led to the steady growth of the company's overall performance. The company's 2021H1 asset-liability ratio was 43.1%, an increase of 6.6% over the end of 2020, mainly due to the issuance of 1 billion yuan of "Yushui 01" corporate bonds in April 2021. The company continues to maintain stable cash flow and good profitability, and its gross profit margin remained above 40% in the first half of 2021.
The aquaculture capacity of supply and discharge has been expanded, and the treatment capacity has been continuously improved. By the first half of 2021, 29 water systems (water plants) of the company's water supply enterprises had a production capacity of 2.7375 million cubic meters per day, an increase of 12% compared with the end of 2020; 108 sewage treatment plants had been put into operation by drainage enterprises. the daily treatment capacity of sewage treatment business is 4.2408 million cubic meters per day, an increase of 19% compared with the end of 2020. There are 8 sets of sludge treatment systems (including investment in new construction, entrusted / leased operation, etc.), with a designed sludge treatment capacity of 1992 tons per day, which is 3.9% less than that at the end of 2020. The company continues to integrate high-quality water supply and drainage assets in Chongqing into the consolidated table, enhance the treatment scale, and further enhance the market share. At the same time, the company also actively and steadily expand Chongqing external water supply and drainage, sludge disposal, water environment treatment and other business markets.
Expand business and open up new markets. In March 2021, the company won the bid for the Comprehensive Water Conservancy Infrastructure Project (PPP) in Anning City, Yunnan Province. The total investment of the project is tentatively about 710 million yuan (subject to the amount confirmed by the audit report of the final accounts). The construction period is 3 years and the operation period is 12 years. It is divided into two categories: water environment comprehensive improvement project and human drinking project. Including Shahe water environment comprehensive improvement project, Anning Cemuhe reservoir water diversion pipeline construction project (phase III) and hot spring Waimawan water purification plant, pipe network project and other three sub-projects. If the project succeeds in winning the bid and landing construction, the company will further break through the existing business area restrictions and open up new business markets.
Profit forecast and investment advice. It is estimated that from 2021 to 2023, the EPS will be 0.40, 0.43 and 0.47 yuan respectively, corresponding to 13x/12x/11x for PE, maintaining the "hold" rating.
Risk hint: water price can not adjust the risk in time, VAT preferential change risk and so on.
