The net profit of 1H22 returned to the mother increased 21.3% year on year. The target price of 8.12 yuan/share company 1H22 achieved revenue/net profit of 20.09/2.05/144 million yuan after deduction of net profit of non-return mother, +4.5%/+21.3%/-12.6% year on year. Guimo's net profit accounted for 50.6% of Huatai's annual forecast value of 405 million yuan. It was basically in line with expectations. The non-recurring profit and loss mainly came from the disposal of Daozhen PPP project franchise rights and financial support funds. We maintain our net profit forecast of 405/453/495 million yuan for 2022-2024. Considering that the company's 2022-2024 ROE was higher than the average of comparable companies but its leading edge gradually shrank, we gave 14x PE in 2022 (referring to the comparable company's 2022 Wind unanimous forecast of an average PE value of 11.7x), with a target price of 8.12 yuan/share, maintaining the “increase in holdings” rating.
The share of revenue from water operation services is expected to increase. The gross margin is expected to be repaired in the second half of the year by business type. 1H22's water operation service/environmental engineering construction service/environmental protection equipment sales and service revenue was +8.8%/+1.6%/-14.7% year-on-year to 10.83/848/71 billion yuan respectively. Revenue growth mainly came from the water operations sector, including revenue growth brought about by successive commissioning of construction projects and price increases. The share of revenue from water operation services increased 2.1 percentage points to 53.9%. The impact of the spread of the epidemic and cost increases in many places in the first half of the year caused the gross margin of water operation services/environmental engineering construction services to fall 3.4/6.1 percentage points year on year to 36.7%/6.2%, driving the company's gross margin down 4.2 percentage points year on year. We believe that an increase in the share of operating revenue will improve the quality of the company's revenue. By increasing the level of energy saving and consumption reduction and smart operation, the company's gross margin is expected to be repaired in the second half of the year.
The total number of new orders remained the same, and the Group's collaborative results are beginning to show
The company added 519/706 million new operation/engineering orders on 1H22, compared to +632.1%/-38.3%. The increase in operating orders came mainly from the Jishou sewage treatment franchise project. Overall, the total number of new orders placed by the company in 1H22 was 1,225 billion yuan, which is basically the same as the previous year (1H21:1,215 billion yuan). By improving operational efficiency and enterprise management level, the company's expense management and control achieved remarkable results. Among them, the management expense rate/financial expense ratio fell 0.8/2.3 percentage points year on year to 4.7%/7.0%, driving net interest rate up 1.5 percentage points year on year to 11.0%. Among the controlling shareholders of the company, the management level improvement and financing advantages brought by Energy Energy Group began to show.
1H22 performance was steady, maintaining the “increase in holdings” rating
We maintain the 2022-2024 net profit forecast of 405/453/495 million yuan, and the corresponding EPS is 0.58/0.65/0.71 yuan. Considering that the company's 2022-2024 ROE was higher than the average of comparable companies but its leading edge was gradually shrinking, we gave 14x PE in 2022 (referring to the comparable company's 2022 Wind unanimous forecast PE average value of 11.7x), with a target price of 8.12 yuan/share (previous value: 7.54 yuan/share, based on 2022 13x PE), Maintain an “increase in holdings” rating.
Risk warning: Project progress falls short of expectations, labor costs are higher than expected, and gross margin repair is lower than expected.
