Viewpoint:
Affected by GF Securities Co., LTD., the company's performance decreased by 39.77% compared with the same period last year. The company holds a 9.01% stake in GF Securities Co., LTD., which is its fourth largest shareholder, and the income from long-term equity investment in Guangfa has always accounted for a high proportion of operating profit. The net profit attributable to the first three quarters fell sharply compared with the same period last year, mainly affected by the decline in GF Securities Co., LTD. 's performance in the past 16 years, in line with expectations. During the reporting period, the net cash flow of operating activities was 286 million yuan, an increase of 33.99% over the same period last year, indicating that the company's main businesses such as water operations, passenger transport services and market management have good profitability and can bring stable cash flow at the same time.
The comprehensive platform of "Water Affairs + solid waste + Project" has initially appeared. The company is the regional water leader in the Pearl River Delta region, with 2.35 million m3 / day water supply capacity and 610000 m3 / day sewage treatment capacity. In July 15, through the acquisition of Tianyi Energy to enter the field of waste incineration power generation, and in January 16, Zhongshan Public works was acquired, making up a number of construction qualifications, preparing for future PPP and cross-regional projects, and the intention of building a comprehensive environmental protection platform of "water + solid waste + project" has been shown.
Passenger services and market management sector, stable growth and high quality profits. The company has the right to operate the passenger route from Zhongshan to Hong Kong, the passenger source is stable, the business is of high quality, and the gross profit margin has been maintained at about 60%. The company is also the largest circulation enterprise of agricultural products in Zhongshan, with the right to operate more than 30 farmers' markets. the gross profit margin of related business has been maintained at more than 60%. We believe that the two businesses will continue to contribute quality profits to the company in the future.
Adhering to the two-round strategy, capital operation and the main business form a good coordination. The company has always adhered to the two-round development strategy of "industry + capital". Capital operation businesses such as equity investment, M & A funds and financial services provide investment and financing and extension M & A platforms for the main business of water and environmental protection, with good synergy; in addition, the company is also changing the current situation of over-reliance on GF Securities Co., LTD. 's equity income by strengthening its main business.
There are many points for future development, waiting for the company to accelerate its growth. 1) PPP market burst, ushering in high growth opportunities, the company recently won the bid for the first PPP project, with a total investment of 263 million. With its strong position in Zhongshan region, the company will be able to obtain PPP orders continuously for a period of time in the future, and high performance growth can be expected. 2) the state-owned assets are injected into the imaginative space. As the only holding listing platform of Zhongshan SASAC, the company is an important channel for its asset securitization. Many assets of the controlling shareholder Zhonghui Group can form good coordination with the company's business, providing a huge imagination space for the injection of state-owned assets. 3) with the help of Fosun, epitaxial mergers and acquisitions can be expected. As the second largest shareholder, Shanghai Fosun holds 12.35% of the company's shares and appoints experienced investment managers as company executives. It is worth looking forward to with the help of Fosun resources to carry out epitaxial mergers and acquisitions; 4) the equity incentive plan is actively promoted, and the application for the company's equity incentive plan has been approved by the relevant departments, which will bring positive significance to the company's development once implemented.
Conclusion:
We believe that the decline in performance caused by GF Securities Co., LTD. 's investment income is an expected event and will not affect the development of the main business, and the company still has the potential for rapid growth. It is estimated that the operating income from 16 to 18 is 1.455 billion yuan, 1.651 billion yuan and 1.816 billion yuan respectively, and the earnings per share are 0.63,0.71 and 0.72 yuan respectively. Maintain the recommended rating.