Events:
The company announced its annual performance forecast for 2017. it is expected to achieve a net profit of 797-899 million yuan in 2017, compared with 339 million yuan in the same period last year, an increase of 135% over the same period last year.
Comments:
Actively expand the PPP ecological project, the annual performance continues to grow significantly:
Benefiting from the strong support of the state for the construction of ecological civilization, the company has actively expanded the garden PPP model, and the construction and operation of various projects have been implemented smoothly, and the performance has continued to grow at a high speed: in the first half and the first three quarters of 2017, the net profit reached 3.97 yuan and 718 million yuan, respectively, an increase of 223.42% and 198.71% over the same period last year. For the whole of 2017, the company signed orders for major projects with a number of local governments of 35.304 billion yuan, 8.3 times the 4.254 billion yuan of new orders signed in 2016, of which PPP projects accounted for nearly 100%. At the same time, the company also signed a framework agreement with a scale of up to 41.15 billion, providing strong support for the continued high-speed landing of future orders.
There is a broad space for land desertification control, and the leading moat in the industry is remarkable:
According to the 13th five-year ecological and environmental protection plan, the desertified land in Inner Mongolia needs to be treated with an area of 61.35 million mu and a broad space for the industry. Due to the specific geographical location and natural environment, Inner Mongolia can be called an important ecological barrier of Beijing, Tianjin and Hebei. The company relies on geographical advantages to undertake most of the local soil desertification control projects in Inner Mongolia, and it is expected that the trillion-level ecological restoration market will continue to benefit the company's future performance. And its top level of ecological management technology and mature ecological restoration model have few competitors in the industry, and the high growth of the company in the future is guaranteed.
Jointly set up PPP Industry Fund to help PPP model:
According to the company's disclosure announcement on December 13, 2017, the company plans to set up the Alashan League Nakano Bifang Investment Center Industrial Fund in conjunction with Inner Mongolia Donghui Health Industry Co., Ltd., Inner Mongolia Hexinhuitong Investment Management Co., Ltd., and will cooperate with the company in the field of ecological restoration, so as to facilitate the company to establish a long-term mechanism of PPP cooperation, give full play to the advantages of the combination of industry and finance, and provide financial support for the company's ecological restoration PPP project. The scale is tentatively set at 220 million yuan, of which 100 million yuan is contributed by the company as an inferior company.
It is proposed to issue overseas bonds to broaden the financing channels of companies:
On January 29, the company's board of directors examined and passed the bill on the proposed issuance of overseas bonds, agreeing that the company should issue no more than 200 million US dollars of bonds outside China with a specific maturity of 3 years. The issuance of overseas bonds will further improve the company's debt structure, broaden financing channels, and ensure the smooth landing and implementation of PPP projects.
Financial forecast and valuation: the company's net profit from 2017 to 2019 is expected to be reduced from 1.61 billion yuan to 1.81 billion yuan, representing a year-on-year increase of 151.5%, 49.0%, and 41.7%, corresponding to EPS 0.53, 0.79, 1.12 yuan. The current share price is 11.2 times 23.7 PE from 2017 to 2019, maintaining a "highly recommended" rating.
Risk tips: PPP project expansion and landing is not as expected, payback risk and so on.