Events:

The company released the 18-year mid-year report. During the reporting period, the company achieved revenue of 643 million yuan, down 38.13% from the same period last year, and its net profit was 157 million yuan, down 23.78% from the same period last year and 30% lower than expected.

Main points of investment:

The currency is tight, the company is cautious, the integrated basin PPP has not started, and the company's revenue is lower than expected. Financing tightened in 2018, and the company did not sign an order for black-smelly watershed management out of caution, which was lower than expected. In addition, the company's C 5 / C 9 separation and comprehensive utilization project and Wulanchabu BOT project have been basically completed, but they are still in the preliminary preparatory stage. The original project is expected to be put into operation by the end of 2017, and the progress is lower than expected. In addition, there is a policy shutdown of Haotian energy conservation, so the company achieved operating income of 643 million yuan, down 38.13% from the same period last year. In terms of profitability, the industrial water treatment operation business was intensive, and the gross profit margin increased by 22.37 percentage points, but the gross profit margin of the project contracting business decreased by 4.97 percentage points due to the rise in raw material prices. Taken together, the company's overall gross profit margin increased by 3.53 percentage points, and the final net profit fell lower than revenue.

High-quality and hazardous waste projects are still in progress, and we look forward to the landing of production capacity. The comprehensive disposal license of 42 kinds of wastes in Jinghua radiates all over Heilongjiang Province, and the annual output of hazardous waste in the province will reach 1.043 million tons by 2020. By the end of the reporting period, the scale of the first phase of comprehensive treatment of hazardous waste is about 83900 tons, which is expected to be completed and put into production in May 19. The second phase has also obtained the EIA report and discussed with a number of interested customers at the same time. The company estimates that the net profit of the hazardous waste project will reach 7099 million yuan / year after reaching production. The qualification of Jilin solid waste license, a wholly owned subsidiary of the company: physical and chemical 8000 tons, incineration 10, 000 tons (including medical waste), landfill 110000 tons. At the same time, the largest hazardous waste landfill in three northeastern provinces (the only dangerous waste landfill in Jilin Province) is under construction, with a storage capacity of 1.4 million square meters. At present, it has been expanded and is expected to be put into operation. The incinerator transformation project has completed the declaration of government examination and approval procedures, and after it has been officially put into operation, the total scale of the incineration line of Jilin solid waste Company can reach 100 tons per day. And the company acquired 51% of the holding shares of Taiyuan Oil in 16 years, which will cooperate with the company's deep petrochemical resources.

Holding petrochemical tailings seam market leader, one-time successful start-up, looking forward to full operation. After the completion of the first phase of Huizhou Ecos project, it will become the largest C5 separation project in the country (with an annual raw material processing capacity of 300000 tons). C5 raw materials are scarce. It is estimated that the total amount of C5 raw materials in the country is no more than 1.8 million tons, and Icos's first phase accounts for 300000 tons, accounting for 17%, which is the largest comprehensive utilization project in Asia. And after the completion of the second phase of Ecos, the deep processing capacity of C5/C9 will be formed. the main products are high-end resins such as DCPD hydrogenated resin and C-9 hydrogenated resin, which have a wide range of applications. The company has become the largest shareholder by 45% of Huizhou Ecos in 16 years, and it is expected that the commissioning of the project will greatly improve the company's profit level. Put into production during the reporting period to achieve a successful one-time start-up to ensure that the equipment starts at low load and runs safely and smoothly.

Profit forecast and investment advice: as the company cautiously promotes the PPP comprehensive river basin project, we downgrade the 18-20 year net profit forecast to 355 million, 478 million, 602 million (originally 648 million, 842 million, 1.075 billion), corresponding to 18 years PE is 25 times, the company has more projects to be put into operation, looking forward to the acceleration of industrial environmental protection in the future, downgraded to "overweight" rating.