Event: on April 3, CLP Environmental Protection released its 2017 annual report. In 2017, the company realized operating income of 680 million yuan, an increase of 4.97% over the same period last year; net profit belonging to shareholders of listed companies was 118 million yuan, an increase of 8.36% over the same period last year; and basic earnings per share was 0.23 yuan. The cash dividend plan is 0.50 yuan (including tax) for every 10 shares.
Comments:
Revenue and gross profit margin of sewage treatment and flue gas treatment business declined. The company provides industrial customers with services such as waste water treatment, condensate refinement treatment, municipal and industrial park sewage treatment, reclaimed water reuse and other services; for thermal power, coal chemical industry, metallurgy and other customers to provide flue gas desulfurization, denitrification, dust removal, ultra-low emission and waste heat utilization and other services. In 17 years, the revenue of water environment treatment and flue gas treatment business of the company was 4.07 yuan and 97 million yuan respectively, down 10.19% and 30.22% respectively compared with 16 years; the gross profit margin of water environment treatment and flue gas treatment business was 28.49% and 18.04% respectively, down 8.84% and 5.63% respectively compared with 16 years. From the perspective of sub-areas, the revenue of municipal sewage treatment and condensate refined treatment fell 52.35% and 43.92% respectively compared with the same period last year, and their combined revenue share dropped from 41% in 16 years to 20% in 17 years. Revenue from waste water treatment and reclaimed water reuse business increased by 126% compared with the same period last year, and the proportion of revenue increased from 8% in 16 years to 18% in 17 years.
Sludge business revenue and gross profit margin have increased significantly, and market development has continued to increase. By extending the industrial chain of "industrial and municipal waste water treatment" to "resource utilization of industrial and municipal sludge", the company has successfully expanded the sludge coupling power generation business model. In 17 years, the company's municipal sludge treatment business achieved revenue of 166 million yuan, a substantial increase of 218% over the same period of 16 years, and the proportion of revenue increased from 8% in 16 years to 24% in 17 years. The early market layout of the company's sludge business has achieved initial results, Changshu sludge coupling power generation project has been completed and put into trial operation; Zhenjiang high-capital sludge coupling project and Xuzhou Huaxin sludge coupling project have been completed and put into operation; Nanjing Chemical Industry Park, Gucheng, Haifeng and Pengcheng projects are under construction. In the past 17 years, the company has continued to strengthen the market development of solid waste resources industry, new orders for solid waste treatment of 273 million yuan, new layout of Guangdong Haifeng and other 8 treatment bases, and signed strategic cooperation agreements with China Resources Power Holdings subordinate companies. As of the end of 17 years, the unrecognized income of solid waste disposal orders in hand is 1.978 billion yuan.
The future development prospect of the company. 1) the company will do a good job in the transformation and upgrading of the water environment treatment industry, actively expand the business of electric power desulphurization wastewater and zero discharge of wastewater, and at the same time continue to increase market development efforts such as urban sewage treatment, urban black and smelly water bodies, municipal and park sewage standard raising and transformation. 2) the company will strive to promote the development of solid waste resources industry, quickly achieve breakthroughs in the fields of hazardous waste treatment and garbage coupling power generation by means of strategic cooperation and technological research and development; 3) actively expand the market field of non-electric flue gas treatment; 4) actively carry out horizontal and vertical mergers and acquisitions around the main industry, and actively promote the extension of industrial chain and intra-industry integration and other extension development.
Profit forecast and rating: based on the company's current equity, we expect the company's EPS to be 0.22,0.24,0.26 yuan from 2018 to 2020. At present, the company is in the transition period of water environment treatment business and the release period of sludge disposal business. We are optimistic about the company's market expansion in related fields and maintain its "overweight" rating.
Risk factors: policy change risk; market competition risk; cost control risk; accounts receivable risk.