Summary of the report:
Event: the company released its annual report for 2017. the revenue was 910 million yuan, down 11.65% from the same period last year, and the net profit was 143 million yuan, up 1.84% from the same period last year. The net profit after deducting non-return was 104 million yuan, down 24.40% from the same period last year, and the performance was slightly lower than expected.
Acquire and integrate resources and plan the international territory. In 2017, the company successfully acquired a stake in DHT, which has rich experience and technology distribution in 25 countries, accelerating the pace of internationalization. In addition, the company has localized and integrated the previously acquired ItN, KWI and SWT resources to promote domestic performance growth and expand its international business. With the help of Belt and Road Initiative's planning advantages, in 2017, the company won the bid for the whole plant sewage treatment station and zero discharge project of the Navoi PVC, caustic soda and methanol production complex project in Uzbekistan, and formally signed the Kathmandu Valley Water supply improvement Project in Nepal to promote the construction project of 50000 cubic meters / day desalination plant in Kurek Town, Mangeshta Prefecture.
Two major industries, five major plates and three carriages, the effect of diversification is becoming more and more obvious. The company adopts the diversified business model of "multi-technology route, multi-product type and multi-industry application", and has achieved good performance in the newly developed section. In 2017, the industry classification code was changed from environmental water treatment to ecological protection and environmental treatment. Among them, the municipal water treatment plate jointly won the bid for the PPP project of the reservoir and water supply project in Muling City, Heilongjiang Province, the PPP project of the first plant and three networks in Yiliang County, Kunming City, and the PPP project of sewage treatment and pipe network project in Wenchang City, Hainan Province. Revenue from municipal and industrial environmental engineering has declined slightly, but it is still the mainstay of the company, accounting for 85.75% of revenue. In the new energy section, the company signed a franchise agreement with the Chibi Housing and Urban-Rural Development Bureau on the urban pipeline gas business of Honggang Town and Huangshapu Town, Tongshan County, Xianning City, Hubei Province, and Zhaoliqiao Town, Chibi City, accounting for 14.25% of the revenue. it has become a new growth point of the company's performance.
Investment suggestion: the company's net profit from 2018 to 2020 is expected to be 177 million yuan, 235 million yuan and 275 million yuan, and the EPS is 0.26,0.35,0.41 yuan, with a price-to-earnings ratio of 26 times, 20 times and 17 times respectively.
Risk hint: PPP business model risk, policy risk