Performance review
2021&1Q22 performance is lower than we expected.
The company announced 2021&1Q22 results: operating income of 3.332 billion yuan in 2021, + 17.8% year on year, and net profit of 255 million yuan,-32.1%. 1Q22 achieved operating income of 932 million yuan, + 22.1% compared with the same period last year, and its net profit was 77 million yuan. Compared with the same period last year, the performance of-11.1% dint 2021 & 1Q22 was lower than we expected, mainly due to the increase in the base figure driven by the preferential policies for the epidemic in 2020 and the obvious impact of the increase in expenses during the reporting period.
The main business grew steadily, and the profitability was relatively stable: 1) the urban and rural sanitation and cleaning business reached 3.233 billion yuan, accounting for 97% of the income, and the income increased by 18.7% compared with the same period last year. 2) among other businesses, the company's domestic waste disposal income increased by 58.43% to 84 million yuan in 2021. In 2021, the company's gross profit margin was 24.19%, an increase of 0.3ppt over the same period last year, and the overall profitability was robust.
During the period, expenses rose and operating cash flows came under pressure: in 2021, the company's expense rate rose 2.0ppt to 15.5%, sales, management, R & D, and financial expenses increased from + 0.2/+0.7/+0.3/+0.8ppt to 1.8%, to 1.8%, to 10.1% and 0.4% to 3.2%, respectively. The increase in financial expenses is mainly due to the expected increase in interest expenses on liabilities and convertible bonds. The increase in R & D expenditure is mainly due to increased expenditure on R & D projects such as solid waste disposal and intelligent sanitation. In 2021, the net cash flow of the company's operating activities decreased by 61.01% to 119 million yuan compared with the same period last year, mainly affected by the increase in cash paid by employees and various taxes and fees.
Trend of development
The leading position of the continued growth of orders is solid, and there is still room for optimization on the cost side. In 2021, the company won the bid with a total amount of 19.038 billion yuan, an annual service increase of 1.418 billion yuan, the total contract and annualized total ranked first, and the market share of the total contract was about 8.8%. In 2021, the company bid for the "waste-free low-carbon" waste sorting project, and obtained the order of Foshan Chancheng District garbage sorting full coverage project with a total amount of about 116 million yuan. We believe that the company's market expansion is efficient, and with the promotion of the "city butler" strategy, it is expected to continue to obtain orders, and the industry's leading position is stable. In addition, the company promotes the research and development of intelligent sanitation information system, we are optimistic that the company will strengthen the level of information technology and improve operational efficiency, and there is still room for optimization on the cost side in the future.
Profit forecast and valuation
Taking into account the company's cost-side pressure, we reduce the company's net profit of 2022E by 19% to 311 million yuan, and introduce an estimated profit of 375 million yuan in 2023. The current stock price corresponds to 14 / 11 times of 202111 / 2022. Maintain the outperform industry rating, taking into account the industry competition or intensified, cut the target price by 36% to 14 yuan, corresponding to the price-to-earnings ratio of 18pm 15x 2022amp 2023, which has 36% upside space compared to the current stock price.
Risk.
The growth rate of orders was lower than expected, and labor costs rose faster than expected.
