Events:
The company publishes its annual report for 2017. During the reporting period, the company achieved revenue of 1.083 billion yuan and net profit of 114 million yuan respectively, up 7.28% and 16% respectively over the same period last year, in line with expectations.
Main points of investment:
Revenue growth improved month-on-month, professional management and fee control to cope with the rise in raw material costs, performance in line with expectations. Stricter environmental protection policies have promoted the upgrading of industrial environmental protection facilities, and the demand for industrial membranes has increased. The company's annual revenue growth rate is 7.28%, which is better than the 5.62% revenue growth rate in the previous three quarters. Subdivision category: fierce competition, the company's membrane product business (621 million, accounting for 57.33% of revenue) growth rate of 4.81%. Affected by the shutdown of environmental protection and the rise in oil prices, the price of raw materials in the upper reaches increased significantly, depressing the profits of industrial water treatment projects, resulting in a 5.83% drop in gross profit margin. Brown fiber business (431 million, revenue accounted for 39.84%) increased by 16.37% year-on-year, gross profit margin increased by 1.92% year-on-year, professional management accelerated inventory turnover (inventory turnover increased by 18%), and successfully responded to the pressure of rising costs. The final increase in net interest rate is higher than revenue.
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.
Has participated in the engineering company, in the future will gradually achieve the company's strategic goal of extending to the vertical and horizontal field of water treatment. 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.
Strategic cooperation with a number of companies 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. At the end of 2017, the company successively signed strategic cooperation agreements with AMANEADVISORS & PARTNERS LIMITED (UK), Beijing Huamei Investment Holdings Co., Ltd., and Shanghai Yuhong Equity Investment Fund Management Co., Ltd.
Based on the fundamental confidence of the company, the controlling shareholders increase their holdings. On February 9, 2018, the company received a notice from CRRC Guiyang vehicle Co., Ltd., a concerted action of the controlling shareholder CRRC Industry Investment Co., Ltd., and CRRC Guiyang recently bought a total of 2000000 shares of the company through the Shenzhen securities trading system, accounting for 0.47% of the company's total share capital. After this increase, CRRC Guiyang holds a total of 10439996 shares, accounting for 2.47% of the company's total share capital. It closed at 7.41 on February 9.
Investment rating and valuation: combined with the annual report, we slightly lowered the company's 18-19 return net profit to 1.4 and 161 million (originally 1.46 and 175 million), and increased the 2020 net profit forecast by 196 million. The current stock price corresponds to 28 times the 18-year PE. Maintain the "overweight" rating and look forward to the landing of the company's extension expansion.
