Events:
The company released its 2018 semi-annual report on the evening of August 24: during the reporting period, the company achieved revenue of 482 million yuan, an increase of 3.82% over the same period last year, and a net profit of 176.7468 million yuan belonging to shareholders of listed companies, an increase of 0.75% over the same period last year. The net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 168.9192 million yuan, an increase of 34.88% over the same period last year. In this regard, our comments are as follows:
Main points of investment:
Affected by repurchase, the growth rate of performance has slowed down and the comprehensive gross profit margin has improved.
In the first half of 2018, the company achieved revenue of 482 million yuan, an increase of 3.82% over the same period last year, and realized a net profit of 176.7468 million yuan belonging to shareholders of listed companies, an increase of 0.75% over the same period last year. The net profit of attribution after deduction was 169 million yuan, an increase of 34.88% over the same period last year, which was in line with market expectations.
The growth rate of the company's performance has slowed compared with the same period last year, on the one hand, because the government plans to buy back the Wangxinzhuang sewage treatment plant, which has gradually reduced its sewage treatment capacity since March 2017, on the other hand, the company's newly started PPP project construction period has not yet confirmed the performance. From the perspective of business, the revenue of sewage treatment business was 421 million yuan, up 4.00% from the same period last year; the revenue from heating sales business was 43 million yuan, up 25.35% from the same period last year; and the revenue from pipe network project fees and other businesses was 4.82 million yuan, down 68.23% from the same period last year. Gross profit margin: the gross profit margin of sewage treatment business is 53.75%, which is higher than that of the same period last year (5.50Pct). The gross profit margin of heating sales business is-75.84%, which is lower than that of the same period last year. The gross profit margin of the company is 43.77%, which is 1.45pct higher than that of the same period last year. In terms of period expenses: management / financial expenses were 2947 / 6.75 million yuan, up 25.12% and 38.09% respectively over the same period last year, and the company's net operating cash flow was 260 million yuan, down 7.49% from the same period last year.
Relying on the advantages of the industrial chain to demonstrate the ability to take orders, the order is full and the potential for development is sufficient.
The company continues to expand the industrial chain on the basis of urban sewage treatment and central heating, and has been extended to reclaimed water reuse, biogas utilization, construction waste, village sewage, watershed treatment, sludge treatment, photovoltaic and other fields. the scope of business covers "big public, big environmental protection, big ecology" and other areas. The company continues to improve the industrial chain to build a comprehensive environmental service provider, and show a first-class ability to take orders. Since 2018, it has successively won the bid for the integrated construction and reconstruction project of water affairs project in Minquan County (815 million yuan), the comprehensive environmental treatment project of Pan River and Sanli River in the central city of Fangcheng County (945 million yuan), the comprehensive environmental control project of Ganjiang River and S103 line and Longquan Park project in the central city of Fangcheng County (819 million yuan), the environmental treatment project of Liuhe ditch and Neihuang River in Neihuang County (PPP project) (761 million yuan), Water Conservancy Bureau of Shangcai County on the PPP Project of Comprehensive Control of du Yigou in Shangcai County (853 million yuan) Gongyi ecological water system construction project (1.397 billion yuan), Dengfeng rural sewage treatment project (189 million yuan), with a total investment of 5.779 billion yuan, with the acceleration of environmental protection PPP project in Henan Province, as the only large state-owned environmental protection platform in the province, the company is expected to harvest more projects by virtue of the advantages of industrial chain and government resources.
Governance solution + sufficient order + expected injection of assets, regional environmental protection platform has entered a period of rapid development.
In 2016, the company solved the problem of inter-industry competition with shareholders through major asset restructuring. In March 2017, the company's first largest shareholder (sewage purification) and second largest shareholder (Thermal Power Corporation) transferred the company's shares to the public utility group, which solved the problem of corporate governance. At the same time, the company continues to improve the industrial chain, orders into the harvest period, the current on-hand orders of more than 11.7 billion yuan, the regional environmental protection platform is about to enter a period of rapid development.
In addition, considering that Zhengdong New area sewage treatment Plant (1 million tons / day) and Shuangqiao sewage treatment Plant (600000 tons / day) will be injected into listed companies in the future, at the same time, the controlling shareholder Public Utilities Group has assets such as heat, water, garbage power generation, etc., the possibility of injection into listed companies in the future cannot be ruled out. Sufficient orders + asset injection, the company's development prospects are worth looking forward to.
Profit forecast and investment rating: maintain the company's "overweight" rating. As the company's income and profit have not been recognized during the PPP construction period, we estimate that the company's 2018-2020 EPS will be 0.34,0.36,0.40 yuan respectively, and the corresponding share price PE will be 20,19,17 times, maintaining the company's "overweight" rating.
Risk hints: the risk of the decline of sewage treatment charges, the risk that the expansion of the PPP project is not as expected, the risk of a substantial increase in accounts receivable, the risk of unrecognized income and profits during the construction of the PPP project, the risk of future acquisition and asset injection of the company, the risk that the project is not advanced as expected, and macroeconomic downside risks.
