Event

The company releases its first quarterly report of 2017

Bohai shares released its first-quarter 2017 report on the evening of April 27, 2017. In the first quarter of 2017, the company realized operating income of 264 million yuan, up 39.23% from the same period last year, and realized net profit of 7.4 million yuan, up 24.02% from the same period last year. Net profit after deduction was 6.94 million yuan, up 41.05% from the same period last year.

Brief comment

The completion of the merger and acquisition of Ka Cheng Environmental Protection led to the improvement of performance in the first quarter.

In the first quarter of 2017, the company realized operating income of 264 million yuan, up 39.23% from the same period last year, and realized net profit of 7.4 million yuan for shareholders of listed companies, up 24.02% from the same period last year. The main driving factor for the improvement of the company's performance is the completion of the consolidation of Jiacheng Environmental Protection. January 9, 2017, Ka Cheng Environmental Protection shares delivery, change registration procedures have been completed, the company now holds 55% of Ka Cheng Environmental Protection shares.

In addition, the net cash flow generated by the company's operating activities in the current period was-55.23 million yuan, a decrease of 194.45% over the same period last year, mainly due to the increase in project payment, equipment payment and raw water fees paid in the current period, which also shows from the side that the company is speeding up project construction. During the reporting period, there were sales expenses of 3.54 million, an increase of 139.86% over the same period last year, and financial expenses of 18.08 million, an increase of 183.6% over the same period last year, mainly due to the consolidation of Jiacheng Environmental Protection. It is expected that as Jiacheng Environmental Protection is incorporated into the company and become a "state-owned enterprise", the financing cost will show a downward trend in the future, and the financial expenses are expected to improve.

The industrial layout of "operation + technology + engineering" is constructed, and the business structure is combined.

Jiacheng Environmental Protection is a leading enterprise of environmental protection in Hebei Province, which has great characteristics and competitive strength in the field of sewage treatment. It is rated as a high-tech enterprise, a joint member of China Environmental Protection and a member of the Environmental Service Chamber of Commerce of the China Federation of Industry and Commerce. Its responsible "11000 M3Compact d black smelly river wastewater ecological restoration and treatment project" was rated as the national key environmental protection practical technology demonstration project in 2013. It has also been rated as "the most growing service enterprise in China's water industry in 2012" by China Water Network. Through this acquisition of Bohai shares, we can quickly complete the accumulation of sewage treatment technology and qualifications, improve their own industrial structure, and cut into the field of environmental protection engineering.

Ka Cheng Environmental Protection has strong "technical strength", complete "engineering qualification" and rich "operation experience". After the completion of the merger and acquisition, it will strongly supplement the business structure of Bohai shares based on water supply services. in the industrial layout to form a "operation + technology + engineering" system structure, strong combination, complementary advantages, revenue and profit scale is expected to increase rapidly.

Jiacheng environmental franchise projects and performance projects are mainly distributed in Beijing-Tianjin-Hebei region.

Ka Cheng Environmental Protection currently has 8 franchises and many performance projects, which are mainly distributed in the Beijing-Tianjin-Hebei region. Among them, Santai Town sewage treatment Plant, a franchise project located in Anxin County, is located in Xiongan New District. The franchise scope of the plant covers financing, construction, ownership, operation and maintenance of Santai Town sewage treatment Plant in Anxin County and collection of sewage treatment service fees. In the future, the new round of coordinated development of Beijing-Tianjin-Hebei highway with Xiongan New area as the core, as well as the development orientation of "green, intelligent, high-end and high-tech" in Xiongan New area, will benefit the company's business widely.

The PPP project in hand is progressing steadily, and the follow-up is expected to be sustained.

Since 2016, the company has continuously won the bid for two PPP projects, Shahe sewage treatment and Lulong County water treatment and other municipal projects, and achieved a major breakthrough in the field of PPP. The Shahe project is to take over the existing completed sewage treatment plant through ROT (reconstruction-operation-transfer) + TOT (transfer-operation-transfer) mode, which will further enhance the company's sewage treatment capacity; Lulong project will invest in a number of new sewage treatment and municipal facilities, with a total investment of about 2 billion, which will directly increase the company's revenue scale and profits.

Maintain the buy rating

The company has unique geographical advantages, and the water business will maintain steady growth; the business field will expand significantly after the merger and acquisition of Jiacheng Environmental Protection; the PPP project boom brings rapid growth opportunities; benefiting from the coordinated development of the Beijing-Tianjin-Hebei region, there is huge room for imagination in the future and maintain the buy rating. It is estimated that the company's revenue in 17 and 18 years is 17.87 and 2.146 billion respectively, the net profit is 1.59 and 208 million respectively, and the EPS is 0.63 yuan and 0.82 yuan respectively, maintaining the "buy" rating.