Events:
Recently, the company released its quarterly report for 2022. During the reporting period, the company achieved operating income of 4.72 billion yuan, an increase of 8.38% over the same period last year, a net profit of 314 million yuan, an increase of 1.38% over the same period last year, and a non-net profit of 300 million yuan, an increase of 7.84% over the same period last year. We analyze that the current phase of the company's business is slightly lower than expected due to the epidemic, but still does not change the judgment on the company's annual performance.
Comments:
Net profit returned to growth compared with the same period last year, gross profit remained stable, and expenses fell slightly during the period.
The company's first-quarter net profit and non-return net profit increased by 1.38% and 7.84% respectively compared with the same period last year, returning to the growth momentum; the company's gross profit margin reached 32.1%, increased 1pct year-on-year, decreased 1.2pct month-on-month, and maintained a stable trend; the expense rate was 19.6%, slightly lower 0.2pct than the same period last year, and 0.3pct lower than the previous year.
The net cash flow generated by the company's operating activities in the first quarter was-606 million yuan, down 652% from the same period last year. It was disclosed that the difference in the settlement time of the project and the accounting standards for enterprises required that the construction expenditure during the construction of the PPP project should be regarded as the cash flow expenditure of operating activities.
Water operations support mid-stream performance.
The company's water operation business is solid and continues to provide support for performance. According to the 2021 annual report, the total scale of the company's sewage and water supply operation is about 2500 million tons per day, with revenue of 7.68 billion yuan, accounting for 34.5% of the annual revenue; contribution gross profit of 2.7 billion yuan, accounting for 39.6% of the total gross profit; gross profit margin reached 35%, and is in the range of increasing year by year. In the future, the water operation business will continue to be the mainstay of the company's performance.
The high growth trend of solid waste remains unchanged, incineration is quickly put into operation, and the sanitation company places a big order.
Although the market space in the incineration field has been gradually filled, the reserve of the project under construction / preparation of the company is still maintained at more than 10,000 tons / day, and it is still in a rapid operation period in the next 2 years. The company plans to put into production and incineration capacity of 6600 tons / day in 2022. The pace of rapid operation of incineration projects in the next two years is expected to continue, promoting high performance.
The company added 127 million yuan in annual service fee for newly signed sanitation projects in 2021, and has successively won a series of sanitation orders in Ningbo Haishu, Shandong Qixia and Yongzhou, Hunan Province since 2022, with an annualized service fee of more than 70 million yuan. the rapid development trend of sanitation is still continuing.
Investment advice: although the company's performance was slightly lower than expected due to the epidemic in the first quarter, the company's water operation business was relatively stable, and the high growth trend of solid waste performance remained unchanged. We judged that the company's annual performance could not be affected after the restoration of the epidemic. It is estimated that the company's net profit from 2022 to 2024 is 2.26 billion yuan, 2.8 billion yuan and 3.09 billion yuan respectively, corresponding to 0.31 yuan, 0.34 yuan and 0.43 yuan for EPS, maintaining the company's target price of 4.48 yuan and continuing to give "buy" rating.
Risk hints: the epidemic repeatedly affects the business risk, water and solid market competition aggravates the risk and so on.