Event: the company issued a 2018 performance forecast, which is expected to achieve a net profit of 221 million-255 million yuan, an increase of 95.46% 125.40% over the same period last year.
Comments:
The performance growth is in line with expectations, and the volume and price of the main business are rising together and the statement effect brings growth.
The company's annual report in 2018 is expected to achieve a net profit of 221 million-255 million yuan, an increase of 95.46% 125.40% over the same period last year, and the performance growth is in line with expectations. The performance growth mainly comes from: ① 's main water treatment chemicals benefit from supply-side reform and strong demand, and product prices rise. At the same time, the company's 30,000 tons / year water treatment agent expansion project was completed and put into production at the end of 2017, and the output is significantly higher than in previous years. ② completed the acquisition of 55% stake in Anhui Zhongxu Environment in December 2017, so Zhongxu Environment was added to the table in 2018. Zhongxu Environment promised a net profit of not less than 80 million in 2018, and the consolidated table is expected to bring the company an increase of no less than 44 million.
Abundant reserves of environmental protection orders on hand to ensure steady growth of performance
2018 is the first year for the company to extend its layout from a water treatment agent manufacturer to the whole water treatment industry chain. Relying on its resource advantages in Henan and Anhui provinces, the company has obtained a large number of environmental protection orders such as garbage disposal and river treatment in Jiyuan City, urban and rural sanitation integration in Yichuan County, comprehensive river management in Pingdingshan City, and PPP project in Bengbu Green Building Industrial Park, providing a guarantee for the company's future performance growth. In terms of financing, the company had 255 million yuan in cash at the end of the third quarter, the asset-liability ratio was 56.09%, and the short-term risk was controllable. In the long run, the company is currently planning to issue 490 million convertible bonds to expand the 180,000 tons / year water treatment agent production line. Due to the good cash flow of the water treatment agent business, the company's cash flow will be improved after it is put into production.
It is proposed to issue 490 million convertible bonds and expand the production capacity of 180000 tons of water treatment agents.
The company's convertible bond scheme has been accepted by the CSRC and responded to feedback, which is expected to be over soon. The company is currently the only A-share water treatment pharmaceutical company, the current water treatment agent production capacity of 90,000 tons / year, the expansion project production capacity will reach 270,000 tons / day, the company's industry position will be strengthened.
Profit forecast and investment suggestion
From 2018 to 2019, the company is expected to achieve a net profit of 252 million and 335 million, corresponding to the current share price of 11 times and 8 times, with a low valuation and high flexibility, giving a "highly recommended" rating.
Risk hint: the project construction is slower than expected, and the price of water treatment agent is reduced.