Half-year 2017 results are lower than expected
The company issued a semi-annual performance forecast for 2017 on July 14, 2017, with an estimated loss of 57.774 million yuan to 62.774 million yuan in the first half of the year, lower than expected and a sharp decline compared with a profit of 176 million yuan in the same period last year. The non-recurrent profit and loss in the first half of 2017 was about 2.24 million yuan (compared with 15.99 million yuan in the same period last year), which had little impact on the overall performance. The main reasons for the decline in performance are: 1) the company recognized 104 million yuan in investment income due to the acquisition of Xiamen Porting in the same period last year, the income is not sustainable; 2) some of the projects undertaken by the company during the reporting period have not yet been recognized; 3) changes in the company's management have a negative impact on normal operations. We believe that the negative impact of the company's management on the normal business activities of the company still exists, and it is difficult to reverse the performance for the whole year of 17 years.
Major changes have taken place in management, and uncertainty remains in the short term.
In November 2016, major changes took place in the management of the company. The actual controllers Luo Xiangbo and Luo Honghua (who now hold 16.85% of the company) were removed from their posts as directors of the company, and Luo Xiangbo was relieved from his post as general manager. Qiu Guoqiang (now 9.62% of the company) and Zhang Yu, the company's second largest shareholder, were elected directors of the third board of directors, while Mr. Liao Zhengzong (chairman of Xiamen Porting) was elected chairman of the company. As the former management refuses to complete the handover, which has a negative impact on the company, the court of the dispute between the former management and the current management has not yet decided, the uncertainty remains in the short term, it is difficult to reverse the performance for the whole year, and the market is worried obviously. the company's share price has fallen 25.9% since the beginning of the year.
The long-term focus lies in the promotion of the full service chain of factory purification.
If the problem of management change is solved and the normal business activities of the company can be carried out, the layout of the company in purifying the full service chain should be paid attention to. The company acquired Luoka Environmental Protection (smoke manager) and Xiamen Porting (bulk material carrier) in 15 and 16 years respectively, and completed the layout of the full service chain of factory purification. it can provide customers with the design, integration and maintenance of the front-end bulk material transportation and storage system, as well as comprehensive environmental protection services such as dust removal and denitrification for back-end flue gas treatment, thus becoming a comprehensive environmental protection platform to enhance the company's ability to take orders. At the same time, taking into account Xiamen Porting 15-17 deduction non-net profit commitment of 0.72 billion 0.97 billion, future performance contribution is guaranteed.
Downgrade profit forecast, downgrade rating to "overweight"
The company has a certain development prospect in the active layout of the transportation and storage of bulk materials at the front end of the purification service chain and the back-end smoke control. At the same time, considering that the impact of the company's management changes on the current business activities will continue in the short term, combined with the company's performance in the first half of 17 years, which is lower than expected, we believe that it is difficult to reverse the performance in 17 years. If the management transition is smooth, 18 years may turn losses into profits, we lower our profit forecast for the company. From 2017 to 2019, the EPS is-0.30x0.35x0.42, and the current stock price corresponds to the 2017-2019 PE is-41-35-29 times. Reference to the atmospheric governance industry comparable company 18-year average PE valuation of 37 times, give the company 18 years 36-38 times PE, lower the target price to 12.6-13.3 yuan, downgrade to "overweight" rating.
Risk hint: company management change risk, enterprise integration risk.