Main points of investment:
Events:
On the evening of March 29, the company released its 2015 annual report. In 2015, the company's revenue was about 1.934 billion yuan, an increase of 5.81 percent over the same period last year. The net profit attributable to shareholders of listed companies was about 331 million yuan, an increase of 7.26 percent over the same period last year. Basic earnings per share was 0.23 yuan per share, an increase of 4.55 percent over the same period last year. The company's performance growth was lower than expected.
Comments:
Maintain steady development, sewage value-added tax (VAT) adjustment affects performance growth
The company continues to maintain sound operation, and its revenue has increased steadily over the past 15 years, mainly due to the increase in business income such as tap water, reclaimed water pipe network connection, energy supply, transformation of scientific and technological achievements, and so on. Affected by the new regulation of Finance and Taxation [2015] No. 78, the levy of VAT reduces the company's sewage treatment business income by about 107 million yuan, which makes the company's sewage treatment revenue decline slightly compared with the same period last year, and drags down the overall performance growth. In terms of profitability, the 15-year comprehensive gross profit margin of the company was 37.86%, a decrease of 2.80% over the same period last year, mainly due to a 4.60% drop in gross profit margin due to the impact of the new VAT regulations on sewage treatment business. On the other hand, the gross profit margin of reclaimed water pipeline connection and tap water supply business increased significantly, which increased by more than 10 percentage points compared with the same period last year, which to a certain extent reduced the adverse impact of the decline in gross profit margin of sewage treatment business on the company's profitability. In addition, at the end of the reporting period, the company held monetary funds of about 1.35 billion yuan, an increase of 530 million yuan over the same period last year, mainly due to the recovery of large accounts receivable. At present, the abundant capital reserves provide favorable conditions for the company's business development.
Accelerate the layout of new energy business and actively cultivate new profit growth points
The company increases the business expansion of new energy supply services, and recently won the new bid for the Binhai New area Cultural Center (Phase I) energy station franchise project, increasing the number of new energy projects to be / under construction to 3. According to the plan, three proposed / construction projects will be put into operation in 2017. after all reaching production, it is expected to bring an annual income of 60 million to 70 million for the company. We believe that with the continuous development of the company in the field of new energy services, the future cooling and heating business is expected to become an important growth pole of the company's profits.
Test the water for financial leasing to help the company speed up its development
The company plans to set up a financial leasing company to provide financing for the company's development and carry out external business. The company carries out financial leasing business, on the one hand, it will broaden the financing channels and provide strong financial support for speeding up the development of water, environmental protection and other main business. On the other hand, by the way of sale and leaseback, the equipment assets of the stock project can be invigorated and low-cost funds can be raised. By replacing other high-cost liabilities or replenishing current funds, the company's overall financing cost will be effectively reduced, and then its profitability will be improved. In addition, the external development of financial leasing business will also bring an increase in the company's revenue and profits.
Profit forecast and investment rating
We predict that the EPS of the company in 2016-18 is 0.24 pound 0.26 RMB 0.28 yuan per share, and the corresponding PE is 34X/32X/29X. At present, the "Water Ten principles" policy has been gradually promoted, and the prosperity of the water treatment industry has been continuously improved. as an established water operation enterprise with the advantage of industrial chain integration and good brand effect, the company is expected to fully benefit from the policy. In addition, with the future reform of state-owned enterprises and the promotion of foreign cooperation, the company's growth space will be further opened. To sum up, continue to maintain the "overweight" investment rating of the company.
Risk hint
1) the implementation of policies such as "Water Ten articles" and the promotion of PPP model are not as expected.
2) the progress of upgrading of sewage treatment plant is lagging behind.
3) Business expansion is lower than expected
4) the increase of sewage treatment cost leads to the decrease of gross profit margin.