Water quality monitoring field leader, "equipment + operation" two-wheel drive high growth. The company has ploughed the environmental monitoring market for 20 years, and the market share of water quality monitoring equipment has reached 14.13% in 2019, and the operation and business layout has been completed based on the advantages of equipment. Under two-wheel drive, the compound growth rate of operating income and home net profit from 2016 to 2020 is 30% and 49% respectively, and the net interest rate is stable 30% +. Looking forward to the follow-up, on the one hand, the "14th five-year Plan" demand to ensure the company's traditional business growth, on the other hand, third-party testing and other model development is expected to open the growth ceiling, the company's performance growth potential is outstanding.
The "14th five-year Plan" procurement cycle is about to begin, and the policy catalyzes the 45 billion third-party testing market. (1) from the perspective of traditional monitoring equipment and services, the Ministry of Ecology and Environment has made it clear that 80% of the state-controlled water quality points in the "14th five-year Plan" will be expanded, superimposed and replaced by equipment, and the demand for the "14th five-year Plan" is still outstanding; (2) the regulations on the Administration of sewage permits was formally implemented in March, and fixed pollution emissions have entered an era of strong supervision. At present, there are 1.2 million fixed sewage discharge sources in China, of which only 10% are equipped with online monitoring equipment, and the remaining discharge sources need to be monitored by monitoring institutions to open the 45 billion yuan / year third-party water quality testing market.
Sitting on the deep technical reserves and financial advantages, the layout of the third-party testing market has significant advantages. According to the Triple Quarterly report in 2021 and the disclosure of the China Environmental Association, the company's independently developed "Water quality automatic Monitoring system" won the first prize for environmental technological progress in 2021, took the lead in realizing automatic monitoring of more than 100 water quality indicators, with more than 500 sample analysis capabilities, and launched a third-party testing business in Beijing and Wuhan. As of 2021Q3, currency funds + transactional financial assets are 1.32 billion yuan, with an asset-liability ratio of 13%. Relying on profound technology and sufficient financial "ammunition" reserves, as one of the established monitoring leaders, it has significant advantages to take the lead in starting the third-party testing market layout.
Profit forecast and investment suggestion: relying on the release of traditional equipment and third-party testing orders during the "14th five-year Plan", the company is expected to return to the high-growth track, with a net profit of 2.68,3.49 and 454 million yuan from 2021 to 2023, corresponding to the latest PE valuation of 21.6,16.6 and 12.7 times.
Considering the company's leading attributes and future performance growth, the company will be given a 25-fold PE in 2022, corresponding to a reasonable value of 36.55 yuan per share, with a "buy" rating for the first time.
Risk hint. The order of the 14th five-year Plan is not as expected, and the development of the third-party testing market is not as expected.