The performance of 1H22 has been greatly affected, and the steady shift of strategy to the south will help to enhance the long-term value of the company 1H22 to achieve operating income / return net profit of 521 million yuan, which is 34% compared with the same period last year. The corresponding 2Q22 operating income / return net profit is 3.51 billion yuan, which is + 11.6% and 43.3% compared with the same period last year. In March 2022, the company completed the subscription to Changjiang Environmental Protection Group, the number of additional shares was 53 million shares, and the net raised capital of 470 million yuan will be used to supplement the company's working capital. This increase will further strengthen the strategic synergy between the company and Changjiang Environmental Protection Group. It will help the company to complete the strategic move to the south. Considering that the company's 1H22 revenue growth rate is slower and the cost is higher, the company's 22-24 return net profit is reduced to 1.82 shock 2.15 / 237 million yuan (the previous value: 2.14 pound 249 pound 274 million yuan). With reference to the company's 22-year PE Wind consensus expectation of 11x, it is optimistic that this increase will enhance the synergy between the company and Changjiang Environmental Protection Group, thus more conducive to the company's strategy to move southward, giving the company a 22-year target PE16x. Corresponding to the target price of 11.36 yuan (previous value:
10.89 yuan), maintain the "buy" rating.
Engineering and operating business are affected by the epidemic, 1H22 revenue is still slightly higher than the same period last year. Under the influence of the 1H22 epidemic, the company's engineering and operational business are negatively affected. Specifically:
1) Engineering business: the travel of the company's personnel is blocked, the bidding and signing of new projects are delayed, the old projects are understarted, and the project schedule lags behind to a certain extent, resulting in a decline in performance compared with the same period last year. 2) Operation business: some of the company's industrial park sewage operation projects are affected by the abnormal business activities of upstream enterprises, resulting in a relatively small amount of incoming water, but the 1H22 revenue of the operation plate still increased slightly, mainly due to a large year-on-year decrease in profits. 2Q22's revenue growth rate is 11.6% year-on-year, which is significantly better than-13.4% of 1Q22. We believe that as 2H22 production and operation gradually resume, revenue growth is expected to accelerate.
The cost increases compared with the same period last year, and the negative impact on the profit side increases.
The operating cost of 1H22 increased by 10.9% to 350 million yuan compared with the same period last year, mainly due to: 1) the electricity consumption cost of the company increased year-on-year as a result of the electricity price marketization reform last year; 2) the company implemented the accounting standards related to the PPP project issued by the Ministry of Finance at the end of last year, resulting in a significant increase in the overhaul and replacement cost of the operating waterworks. In addition, the company's 1H22 sales expenses / administrative expenses / financial expenses / R & D expenses are-17.6%, 6.7%, 27.9%, 37.2% respectively compared with the same period last year, mainly due to: 1) the decrease in business expansion under the epidemic; 2) the increase in labor costs due to the gradual increase in staffing for the strategic southward shift. 3) the average share of short-term loans in the current period increased compared with the same period last year, and in the current commercial operation of some investment projects, the interest on special loans changed from capitalization to expense; 4) continue to increase investment in research and development.
The target price is 11.36 yuan, maintaining the "buy" rating
We downgrade / raise the company's revenue growth / cost forecast, so we reduce the company's 22-24 return net profit to RMB 2.82 million. Corresponding to EPS0.71/0.84/0.93 yuan, we give the company a 22-year target PE16x with a target price of $11.36, maintaining a "buy" rating.
Risk hint: the epidemic affects the project schedule risk, and the newly signed order / policy implementation is not as strong as expected.
