Main points of investment
Performance review: Qiangtai Environmental Protection's operating income in 2015 was HK $145 million, an increase of 70.8% over the same period last year; the profit attributable to the owner of the parent company was 39.51 million yuan, an increase of 326.3% over the same period last year; earnings per share were HK4.37 cents, an increase of 207.7% over the same period last year; it is recommended to pay a final dividend of HK1 cents (special interim dividend of HK2 cents).
Construction revenue has risen sharply. In 2015, the revenue from construction services was 79.75 million yuan, up 378.1 percent from the same period last year, and the gross profit margin was 24.0 percent, up 12.1 percent from the same period last year. The great increase in construction services is mainly due to the upgrading of Rugao Hengfa facilities, which is also the main reason for the substantial increase in revenue and profits in this period.
Lower operating income and gross profit, facility upgrading and rising operating costs. The operating income for the current period was 48.95 million yuan, down 9.4% from the same period last year; the gross profit margin was 29.7%, down 28.6% from the same period last year, mainly due to the upgrading of facilities, the decline in water volume, and the rise in operating costs. If the company can reach an agreement with the government to raise water prices, gross margins are expected to be restored.
Tax dividend thickening performance. Rugao Honghao facility obtained a sewage discharge permit in July 2015 and can enjoy preferential income tax policies, and in November 2015, the tax authorities returned a total of 10 million yuan in income tax for the period from 2012 to 2014.
Pay attention to the progress of new project expansion. At present, the company has launched a new round of expansion strategy, and during the reporting period, it has signed a letter of intent for the investment of the second sewage treatment plant in Wuping County, Fujian Province, and the expansion of new projects in the future is expected to become a new driving force for the company's performance growth.
Investment suggestion: PE14 times in 2015, which belongs to the middle level in the water supply unit. Due to the small size of the company, the performance is more flexible, and it is the income target of "Water Ten articles" and is of sustainable concern.
Risk hint: the number of new projects has decreased and the RMB has continued to depreciate.