Events:
The company released its semi-annual report for 2017, and the results were in line with expectations. During the reporting period, the company's revenue and net profit were 532 million yuan and 63 million yuan respectively, an increase of 5.8% and 22.53% over the same period last year, in line with expectations.
Main points of investment:
The 13th five-year Plan promotes the development of the industry, desalination is further promoted, the demand for industrial membrane is steadily rising, and revenue is growing steadily.
The expansion of the water purifier market led to the demand for household membrane, but the competition intensified and the gross profit margin fell 3.64 percentage points. The recovery of overseas demand has been slow and exports have fallen slightly. During the reporting period, Wharton realized operating income of 325.505 million yuan, an increase of 3.74% over the same period last year, and a net profit of 75.9226 million yuan, an increase of 1.46% over the same period last year. Macroeconomic growth coupled with consumption upgrading to drive demand, the company's reporting period through the improvement of product lines, optimize cost control, brown fiber performance exceeded expectations. In the first half of the year, the operating income of brown fiber was 192.6002 million yuan, an increase of 25.87% over the same period last year, and the net profit was 17.4932 million yuan, an increase of 97.72% over the same period last year. The competition of household water purification equipment is fierce, the company develops building water purification, and the loss is lower than the same period last year.
The first phase of the new Shawen RO film base has been put into production, the construction of the second phase has started, and the follow-up production capacity will still be increased. The company's RO membrane production capacity is about 8 million square meters in 2015. at the end of 2015, Shawen base has built two new membrane production lines, RO membrane 6 million square meters, ultrafiltration membrane 3 million square meters, the first phase has reached full production. Membrane technology is the main direction of water treatment, the current nanofiltration membrane and plate ultrafiltration membrane are still mainly imported, the company expects to increase sales by virtue of cost advantage in the future, the second phase will build a new nanofiltration membrane 4.8 million square meters, plate ultrafiltration membrane 1 million square meters production line, the construction period of two years, has been started, is expected to reach production in 2020, when the company's production capacity will be further increased.
With equal emphasis on endogenesis and extension, we have participated in the engineering company and will gradually achieve the strategic goal of extending the company to the vertical and horizontal field of water treatment in the future. The company's strategic positioning is clear, and the pace of extension will be accelerated while ensuring endogenous growth, including: upstream membrane materials; downstream water treatment projects, especially special sewage treatment projects with high-tech threshold, or downstream projects that pave the way for the development of special membrane products market; water operating assets with good cash flow, low collection risk and technical threshold. In addition, the field of hazardous waste is also an area that the company is optimistic about and actively looking for. After the company's equity is transferred to CRRC, the decision-making chain is shortened, which is of great help to the extension M & A strategy, and the company is provided with 240 million low-interest loans with an interest rate of less than 3%, which will further benefit the development of the company. Sign PE outsourcing agreement to speed up the pace of epitaxial mergers and acquisitions. The company signed the Financial consultant Cooperation Agreement with Yuhua on March 30, 2017, stipulating that it will provide the company with no less than 10 target companies that meet the relevant requirements for environmentally friendly water treatment every year, among which there are not less than 4 target companies with revenue of more than 500 million yuan. It will help to improve the efficiency of M & A project search and accelerate the pace of epitaxial M & A, which is in line with the company's overall development strategy. During the reporting period, the company participated in Huitong Environmental Protection Company, established a cooperative relationship with the green environmental protection team, and initially involved in the field of water treatment engineering, in order to promote strategic coordination with the company's membrane material research and development and application.
Investment rating and valuation: considering capacity construction, production progress and downstream demand growth, we maintain the company's 17-19 net profit of 1.29,1.71 and 215 million respectively, corresponding to earnings per share of 0.31,0.41,0.51 yuan per share, respectively. The current stock price corresponds to a 17-year PE of 38 times, maintaining the "overweight" rating and looking forward to the landing of the company's extension expansion.