Performance review
1H22 performance is basically in line with our expectations.
The company announced 1H22 results: revenue 3.452 billion yuan, year-on-year + 8.6%, month-on-month-15.3%; return to the mother net profit of 936 million yuan, corresponding to 0.19 yuan per share, year-on-year-11.3%, month-on-month-8.5%, basically in line with our expectations.
Trend of development
The increase in sales led to the increase in the scale of income, and the growth rate of production capacity slowed down by the epidemic. The revenue of the sewage treatment section of 1H22 Company was 2.07 billion yuan, + 12.6% compared with the same period last year, while the revenue of the tap water supply sector was 829 million yuan, + 2.73% year-on-year. The company's water price did not adjust in the first half of the year, and the revenue growth mainly came from the increase in sales volume. As of June 30, 2022, 25 water systems (water plants) of the company's water supply enterprises have a production capacity of 3.1215 million cubic meters per day, an increase of 96000 cubic meters per day compared with the end of 21; sewage treatment plants have been put into operation by drainage enterprises. the daily treatment capacity of sewage treatment business is 425.855 million m3 / day, compared with an increase of 10,000 cubic meters / day at the end of 21. We believe that the slowdown in capacity growth is mainly affected by the epidemic, and we expect that when the epidemic improves in the second half of the year, the company is expected to speed up capacity construction, with full-year results expected.
The gross profit margin of the sewage treatment sector rose against the trend, deducting the non-return net profit of more than 9% compared with the same period last year. 1H22's gross profit margin was 44.2%, an increase of 0.24ppt over the same period last year, in which the gross profit margin of the tap water supply plate was 26.32%, down 3.05 ppt from the same period last year; and the gross profit margin of the sewage treatment plate was 50.27%, an increase of 1.40ppt over the same period last year. In the context of rising costs, the company's gross profit margin rose against the trend, fully reflecting the company's management ability. The decline in return net profit is due to the influence of non-recurrent profit and loss. In the same period last year, the company's water supply company transferred water supply assets in the western trough and valley area of the main urban area of Chongqing, resulting in a higher 1H21 base, resulting in a year-on-year decline in non-recurrent profit and loss. 1H22 deducted non-return net profit of 846 million yuan, + 9.35% compared with the same period last year.
Actively promote the construction of intelligent water services, operational efficiency is expected to continue to improve. The company adheres to the innovation-driven development strategy, focuses on the transformation of digital intelligence, actively promotes the construction of "intelligent water affairs" by means of big data and cloud computing, improves the whole-life management and control mode of equipment, and effectively improves the reliability and utilization rate of equipment. Further straighten out the management system of the professional center, give full play to the professional advantages of five professional sub-companies, such as water quality testing, educational science and technology, Yuantong electronics, water supply design and customer service, so as to provide strong support for the company's high-quality development. We believe that the company's management and operational efficiency is expected to be further improved, and there may be better performance in terms of cost control and profitability optimization.
Profit forecast and valuation
The net profit of 2022MB in 2023 will remain unchanged at 22.59 / 2.476 billion yuan. The current share price corresponds to a price-to-earnings ratio of 11.4 times earnings for 2022 Universe in 2023. Maintain the outperform industry rating, taking into account the recent sector valuation changes, cut the target price by 10% to 7.2 yuan, corresponding to the 2022 prime 15.3 times 2023 price-to-earnings ratio of 13.8, there is 34.1% upside compared to the current stock price.
Risk.
The sewage disposal fee is downward; the project is not as expected; the risk of interest rate fluctuation.
