Summary:
The company is the only state-owned listed enterprise in Zhongshan City. It is the largest water supplier in Zhongshan City and the only sewage treatment enterprise in the city. The actual controller is the Zhongshan State-owned Assets Administration Commission. The company's main business includes environmental protection, solid waste treatment, engineering construction, market operation, port passenger transportation, financial services and equity investment. The company's tap water supply accounts for 80% of the city, sewage treatment accounts for about 35%, and its location monopoly advantage is obvious.
Currently, China's environmental protection industry has ushered in a new era. The Nineteenth National Congress Report further clarified the requirements for ecological civilization in achieving the goals of the “two hundred years” stage: by 2020, we will resolutely fight pollution prevention and control; by 2035, the ecological environment will fundamentally improve, and the goal of a beautiful China will basically be achieved. The company will continue to focus on the strategic goal of being an “industry-leading and first-class comprehensive environmental service provider in China”, focus on environmentally friendly water services, improve and improve integrated water services, and strengthen collaborative development between engineering business and environmentally friendly water services.
The company is also actively investing in equity and has taken shares in a number of companies. Among them, Guangfa Securities, the investment income obtained has become an important source of profit. As of the end of 2017, the company held 10.33% of shares in GF Securities. In 2017, the company used equity law to confirm investment income of 888 million yuan for GF Securities, which became the main source of profit for the company.
Profit forecast: We expect the company's main business revenue for 2018, 2019, and 2020 to be 1,791 billion yuan, 19.71 billion yuan, and 2.148 billion yuan respectively, net profit of 1,181 million, 1,244 million yuan, and 1,218 billion yuan respectively, and corresponding earnings per share of 0.78, 0.79, and 0.80 yuan respectively, giving an investment rating of “increase in holdings”.
Risk analysis: 1) GF Securities's performance growth rate is lower than expected; 2) Water price adjustments are delayed or lower than expected; 3) National environmental policy regulation; 4) Other irresistible risks.
