Event
Sign the Framework Agreement on the acquisition of Jiangsu Yongbao Environmental Protection Technology Co., Ltd.
The company recently signed the Framework Agreement on the acquisition of Jiangsu Yongbao Environmental Protection Technology Co., Ltd. with all the shareholders of Jiangsu Yongbao Environmental Protection Technology Co., Ltd., which intends to purchase 70% of Yongbao Environmental Protection by cash payment, with a transaction amount of 385 million yuan.
Sign the Strategic Cooperation Agreement with Henan Water Conservancy Investment Group
The company recently signed a "Strategic Cooperation Agreement" with Henan Water Conservancy Investment Group to reach an agreement on strategic cooperation in construction projects such as water conservancy, urban water affairs and water resources extension industry, and sponge cities in Henan Province. It is estimated that the investment amount of the cooperation project is about 20 billion yuan, and the cooperation period is 30 years.
Brief comment
Obtain the capacity of hazardous waste disposal and further improve the layout of environmental protection platform
Yongbao environmental protection is based on the field of harmless disposal, comprehensive utilization and water pollution treatment, and has an independent and complete integrated solution for hazardous waste collection, transportation, pretreatment, disposal and resource utilization. participated in the national 863 major science and technology project "bulk industrial solid waste treatment and resource technology and demonstration" construction, harmless disposal technology is advanced. In the framework agreement, Yongbao environmental protection commitment has been audited to deduct the non-net profit of not less than 45 million yuan in 2017 and no less than 55 million yuan in 2018, and the price-to-earnings ratio of this acquisition is calculated to be 11 times.
Ke Rong Environment has begun due diligence on the target company, and the two sides will implement a formal equity transfer agreement by September 30. We believe that if the acquisition can be successfully completed, the company will further improve the strategic layout of comprehensive environmental management, enhance the business strength of the hazardous waste sector, effectively expand the environmental governance industry chain, and enrich the diversity of environmental protection business; at the same time, it will create new profit growth points and effectively enhance market competitiveness.
Highlighting the strong resource strength of the team, the accelerated landing of the PPP project is expected to cooperate with the wholly state-owned Henan Water Conservancy Investment Group following the previous cooperation agreements signed with Henan Yexian Government (local government) and Henan Water Conservancy first Bureau (state-owned enterprises), highlighting the strong government relations and resource strength of the new senior management team. Henan Water Conservancy Investment Group is based on the assets of provincial five major reservoirs and five major irrigation areas, integrates other water conservancy state-owned operating assets as its registered capital, and strives to become a first-class water resources industry investment group in China. After the country has established the development strategy of sponge city, Henan Water Conservancy Investment Group will increase investment in the whole province to promote the construction of sponge city in the whole province. This time, the two sides will jointly initiate the establishment of industrial funds for water ecology and water environment, invest in the stock of Henan Water Conservancy Investment Group and the newly built PPP projects, and can also contract PPP projects in the Henan market. After signing the agreement, 1-2 projects will be selected as pilot cooperation.
We believe that the company and Henan Water Conservancy Investment Group to carry out strategic cooperation, give full play to their respective business advantages, the formation of complementary advantages, the relevant PPP orders will accelerate the landing. From the perspective of strategic layout, the company reached cooperation agreements with local governments and state-owned enterprises through the strong resource advantages of the team, and obtained more orders by sharing the project storehouse. Further improve the company's comprehensive strength in the construction and operation of water environment comprehensive management projects; the layout in other sub-areas is still lax, and continue to improve the construction of environmental protection platform through the acquisition of high-quality targets.
Actual controllers and senior executives increase their holdings at a premium, demonstrating strong confidence in future development in April this year, the company's actual controller, chairman, Ms. Mao Fengli, and the company's directors, supervisors and senior managers (management team) announced that they planned to increase their holdings in the company through the trading system of the Shenzhen Stock Exchange within 12 months, with a lower limit of 100 million yuan and an upper limit of 1 billion yuan. This time, the actual controller and the senior management team intend to use their own or self-raised funds to increase their holdings at a price of 15 yuan per share, compared with the company's closing price of 7.89 yuan per share before suspension, the premium is obvious, which fully shows that the management of the company is optimistic about the environmental protection industry for a long time. and firm confidence in the future sustainable development, after completion will further strengthen the management and control of the company's business development. In addition, Dong Jiangao, a company participating in the plan, promised not to reduce its holdings within six months.
Maintain the buy rating
We believe that after taking ownership of Fengli Capital, the company's operation has been optimized in many aspects, such as business management and capital operation. In addition, the first phase of the equity incentive plan of the company has been awarded and completed, including 182 directors, senior managers, core technical (business) personnel, etc., and the net profit in the exercise conditions has increased significantly compared with the same period last year, indicating that the company will usher in great-leap-forward development.
We are optimistic that the company's cooperation agreements have landed projects one after another, resulting in incremental performance; at the same time, we continue to look for high-quality environmental protection targets and improve our business layout through industrial investment funds. The company is expected to achieve net profit of 1.63 yuan and 204 million yuan respectively in 2017 and 2018, corresponding to 0.23 yuan and 0.29 yuan of EPS, maintaining the buy rating.
