Incident: Shenzhen Guozhong, a wholly-owned subsidiary, will increase the capital of Huizhou Xiongyue Environmental Technology Co., Ltd. by 13 million yuan, holding 10% of Huizhou Xiongyue's shares after the capital increase. In addition, a “Framework Agreement on Acquiring 60% of Huizhou Xiongyue Baohuan Technology Co., Ltd.” Shenzhen Guozhong will continue to obtain the remaining 60% of the required shares by increasing Xiongyue's capital and/or purchasing shares from Mr. Mao Wenxiong and Ms. Chen Suqin to ensure that Shenzhen Guozhong finally obtains 70% of the target company's shares at a total consideration of 91 million yuan.
Industrial sewage treatment goes one step further: Huizhou Xiongyue is committed to environmental protection fields such as wastewater treatment and solid waste disposal, and participated in the preparation of the “Membrane Biophysical Sewage Treatment Engineering Technical Specification”. The self-controlled membrane bioreactor it developed (small footprint, low operating costs, intelligent control, convenient installation, stable and reliable operation, etc.) and “recycling of waste printed circuit boards” (microbial recycling of heavy metals, can be applied to waste circuit boards and heavy metal sludge containing heavy metals) (Recovery of heavy metal resources) will Strengthen technical capabilities in the field of industrial sewage treatment, especially industrial sewage treatment containing heavy metals, and reserve technology for entering the field of resource recycling to help the expansion of the Southern Market. The impact of this investment on the company's current performance is limited, and technology acquisition is beneficial to market development and overall strength improvement. In addition, if successfully implemented later, the performance promise of a total net profit of 42 million yuan in 2015-2017 will also have a certain positive impact on future operations.
Investment advice: Without adjusting the company's profit forecast, it is estimated that the 2014-2016 EPS will be 0.15 yuan, 0.27 yuan and 0.38 yuan respectively, and the corresponding PE will be 46.5 times, 26.4 times, and 19.1 times. Firmly recommending logic, management participated in the improvement of interest coordination mechanisms, the rural water and industrial water business progressed steadily, the water channel protein film business was stored, the investment and merger strategy continued to be implemented, and efforts were made to become an environmental protection industry system service provider and actively transform. Maintain the “Buy-A” investment rating, with a target price of 8.1 yuan for 6 months.
Risk warning: Market development falls short of expectations, project progress falls short of expectations, etc.
