1H22 performance is in line with our expectations
The company announced 1H22 results: revenue 1.914 billion yuan, year-on-year + 22.87%, month-on-month + 7.89%; return to the mother net profit of 156 million yuan, corresponding to earnings per share of 0.38 yuan, year-on-year + 3.88%, month-on-month + 48.57%. In the second quarter, the company achieved operating income of 982 million yuan, + 23.64% year-on-year, and net profit of 79 million yuan, + 24.36% year-on-year, in line with our expectations.
Trend of development
The main business grew steadily, and the gross profit margin of the sanitation plate rose against the trend. The revenue of 1H22's urban and rural sanitation and cleaning business reached 1.85 billion yuan, an increase of 22.3% over the same period last year, mainly due to the increase in the number of projects operated by the company. 1H22's annual gross profit margin was 24.8%, an increase of 0.85ppt over the same period last year, while that of urban and rural sanitation and cleaning business was 24.8%, an increase of 1.16ppt over the same period last year. The company's gross profit margin rose against the trend under the disturbance of the epidemic, reflecting the company's good cost control ability.
The company deeply promotes fine management, and the expense rate decreases during this period. The company takes refinement as the starting point, takes multiple measures to promote the dual improvement of management efficiency and business intelligence, and optimizes the management and control system. During the 1H22 period, the expense rate decreased by 0.09ppt to 14.9%, and the sales, management, R & D, and financial expense rates were compared with the same period last year-0.70/+0.01/+0.37/+0.23ppt to 1.10%, 9.87%, 0.63%, 3.25%. The increase in financial expenses is mainly due to the increase in interest charges on convertible bonds and the handling fees of financial institutions, while the increase in R & D expenses is mainly due to increased expenditure on R & D projects such as solid waste disposal and intelligent sanitation.
Continue to promote the urban butler strategy and accelerate the horizontal expansion of the business. The total amount of new contracts of 1H22 Company is 5.06 billion yuan, and the annual amount is 620 million yuan. The newly signed units are in the forefront of the industry, and the total amount of orders to be executed is nearly 55 billion yuan. From the layout area, the company has newly entered Shanghai and other important areas, has signed 32 new projects in many places, and the city butler business has expanded to 26 provinces across the country. We believe that under the higher requirements of urban governance put forward by the policy side, the market-oriented order is gradually changing from small amount and single field to diversified business and the integration of urban and rural areas. as the forerunner of the "city housekeeper" model, the company has a significant competitive advantage and has no worries about long-term growth.
Profit forecast and valuation
We maintain a net profit of $311 million for 2023. The current share price corresponds to 16.1 and 13.3 times earnings from 2022 to 2023. Maintain the outperform industry rating and maintain the target price of 14.00 yuan, corresponding to 18.4 times 2022 price-to-earnings ratio and 15.3 times 2023 price-to-earnings ratio, which has 14.6% upward space compared with the current stock price.
Risk.
The growth rate of orders was lower than expected, and labor costs rose faster than expected.