Inner Mongolia's steady growth is encouraging, and the company is expected to benefit. Inner Mongolia plans to implement 3,289 major projects in 2022, with an annual planned investment of 585.4 billion yuan, an increase of 25.76% over the previous year. In the first quarter alone, Inner Mongolia completed an investment of 101.3 billion yuan, 3.6 times that of the same period last year. There are clear signs of infrastructure investment ahead of schedule. According to recent information from the Inner Mongolia Bureau of Statistics, from January to April 2022, the amount of fixed asset investment completed in Inner Mongolia increased 35.70% year-on-year, and steady growth achieved remarkable results. As a leading enterprise in the field of grassland ecological restoration in Inner Mongolia, the company is in line with the big trend of green economy and ecology orientation, and is expected to continue to benefit.
Project advance payments are becoming normalized, and it is expected that cash flow will continue to improve in the future. The company's net operating cash inflow in 2021 was 580 million yuan, an increase of 1,016 million yuan over the previous year. The receivables and payout ratios increased 5.54 pct and -40.5pct respectively to 82.74% and 83.71%, respectively. Cash flow improved dramatically. In recent years, the company has been cashflow-oriented and has paid more attention to repayment guarantees for proposed projects. Currently, most of the project contracts it undertakes include 10% upfront payment, so the company's future cash flow will continue to improve. The core characteristic of the garden business is capital advances. As the scale grows, external financing must be continuously increased to ensure the orderly operation of business activities. Therefore, an improvement in cash flow will provide space and impetus for the company's future growth.
The northwest ecological restoration market may remain high, and the company's market share is expected to increase. In terms of quantity, according to the “Construction Plan for Major Ecological Protection and Restoration Projects in the Northern Sand-proof Belt (2021-2035)”, demand for ecological restoration will remain high; judging from the price point of view, the increased difficulty of restoration will lead to an increase in the unit price of ecological restoration projects. Furthermore, as the difficulty of treatment increases, shrubs and herbs will increase the proportion of rehabilitated vegetation, which will help the company increase its market share.
New orders have increased dramatically, and grassland restoration leaders have set sail again. In 2021, the company received major orders in Shaanxi and Tongliao, Inner Mongolia. A total of 143 new construction contracts were signed, with a contract amount of 457,97423 million yuan, an increase of 362.48% over the previous year. Under the guarantee of sufficient orders, grassland restoration leaders are expected to take off again.
Maintain the company's “buy” rating, with a target price of 5.2 yuan. The company's EPS for 2022-2024 is expected to be 0.26/0.34/0.43 yuan. We expect the construction bull market to arrive in full. As one of the main forces of steady growth in Inner Mongolia, the company's performance is flexible, and cash flow is expected to continue to improve, giving PE a 20-fold valuation.
Risk warning: Warmth and humidity in the northwest fall short of expectations; grassland carbon sinks fall short of expectations; competition in the grass seed industry intensifies