Summary of investment

-New drainage processing model for rapid growth

-continue a number of new PPP projects, which will be thickened

-valuation is lower than that of the same industry, and safety is adequate.

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The company's stock market has been fully restructured in the first half of the year, and in the second half of the year, due to the rapid growth of construction revenue, the target of 30% annual growth is expected to be achieved, and stocks are equipped with upward space. We expect the parent profit of our company in 2017 and 2018 to be 453 million and 570 million respectively, with a target of HK $2.87. (as of October 16)

Health and health growth in the first half of the year: in the first half of 2017, Kanda Environmental Protection realized income of 1.068 billion yuan per capita, an annual increase of 18.33%, of which construction income was about 5.05 billion yuan (+ 26.9%) (including 409 million income from urban water construction, 108 million income from water environmental treatment construction, 0.34 million income from water treatment construction in villages and villages), and net income of 298 million yuan (+ 13.3%). The financial income is 2.2 million yuan (+ 7%). The mother's profit was 177 million yuan, an annual increase of 56.6%, corresponding to basic earnings per share of 8.54 cents (+ 56.4%). The profit growth rate greatly exceeded the income growth rate, mainly due to the investment income of 0.37 yuan from the acquisition of 15% of the Central Plains Capital shares.

Market prices are a severe drag on construction gross profit margin: in terms of profitability, gross profit margin fell by 2% to 40% in the same period last year, mainly due to the decline in the gross profit margin of construction services, which accounts for a large proportion of income, and the decline in the share of financial income. The expenditure rate during the period was very high, rising 1% to 27.82% over the same period last year, and the interest rate was 17.16%, up 3.6% from the same period last year.

The scale of water treatment has increased greatly: in the field of urban water, the company strives to process the model through market development and extension. During the period, it acquired approximately 1.09% of the shares of Prudential Water Holdings Limited and Hatlen Investment (Aus.) Pty Ltd. 100% of the shares, 100% of the shares of Shanlang Min Water Co., Ltd., and 70% of the shares of Changzhou Lianyuan Water Co., Ltd. As of September 30, the company has signed a contract to process 410.9 million items of water per day, an annual increase of 40.8%, a daily increase of 298.4 million, a year-on-year increase of 292%, a year-on-year increase of 775 million, an annual increase of 167.2%, and a daily increase of 350,000, an annual increase of 9.4%. The rapid growth of the new processing model will provide a guarantee for the sustained growth of urban water expenditure and construction income.

The company has accelerated the progress of the project and has undertaken a large number of PPP projects since 2017, especially in the second half of 2017, including the PPP project for the new construction of the conduit corridor in Nanhai New area, Weihai, Shanxi Province, the PPP project for the treatment of waste water in Meizhou, Jiangxi Province, the PPP project for the first phase of the Jianhe River Basin Project in Mianzhou, Jiangxi Province, the PPP project for the first phase of the Jianhe River Basin Project in Xianzhou, Jiangxi Province, and the PPP project for the first and second phases of Huizhou Yanan living Water in Huizhou. The cumulative investment is nearly 5 billion yuan. With the intensive construction of new PPP projects in the second half of the year, construction revenue in the second half of the year is expected to exceed that in the first half of the year, and construction revenue for the whole year is expected to increase.

Hint of the alarm

The new treaty project is lower than expected.

The start of PPP is slower than expected.