Events:
The company publishes its 2018 annual report. During the reporting period, the company achieved revenue of 1.105 billion yuan, an increase of 2.06% over the same period last year, and its net profit was 88.03 million yuan, down 23.08% from the same period last year, in line with expectations.
Main points of investment:
Subdivide the product market competition to compress the profit space, calculate the impairment to affect the performance. During the reporting period, 1) the company's first main business membrane products achieved revenue of 661 million yuan, an increase of 6.52% over the same period last year, and revenue growth was stable. However, the tightening of the national environmental protection policy has led to a rise in raw material prices, resulting in a 2.53% year-on-year drop in gross profit margin. 2) the company's second-largest main business, brown fiber business: the industry is in the trend of centralized brand integration, with sales of brown products falling 4.22% year-on-year, with revenue of 427 million during the reporting period, down 1.09% from the same period last year. On the other hand, the manufacturing cost of brown fiber increased by 4.27%, and the gross profit margin decreased by 1.33%. In addition, due to the increased share of Wharton industrial film sales during the reporting period and the longer accounts receivable period for industrial customers, accounts receivable increased by 245.99% compared with the same period last year. While the impairment of intangible assets and accounts receivable is calculated to be 5.76 million yuan in the reporting period of the company. And the holding of shares led to a loss of 4.5 million yuan in fair value changes, so the final return net profit of the company fell 23.09% year-on-year.
Shawen RO film new base Phase II part of the infrastructure acceptance, looking forward to the landing of new production capacity. The company's RO membrane production capacity is about 8 million square meters in 2015. at the end of 2015, Shawen base has built two new membrane production lines, RO membrane 6 million square meters, ultrafiltration membrane 3 million square meters, the first phase has reached full production. Membrane technology is the main direction of water treatment. At present, domestic nanofiltration membrane and plate ultrafiltration membrane are still mainly imported. The company expects to increase sales by virtue of cost advantage in the future. The second phase will build a new production line of 4.8 million square meters of nanofiltration membrane and 1 million square meters of plate ultrafiltration membrane. The construction period is two years. At present, part of the infrastructure has been checked and accepted, and the production line has been installed and debugged. The production of the project will further improve the supply capacity of high-quality membrane separation materials.
Divest the loss business and superimpose new profit growth points, and the future performance is worth looking forward to. Based on the upstream membrane material, the company participated in the engineering company in 2017 and reached a number of strategic cooperation to extend to the downstream of water treatment. In August 2018, the company won the bid for the first 50000 tons / day reclaimed water reuse project EMC contract energy management, with a total investment of 220 million, an operating period of 10 years, and an estimated total income of 1.063 billion, which will have a positive impact on the company's performance. Lithium battery diaphragm products, the company completed the pilot test to achieve a small amount of supply, in the future will gradually enhance the batch supply capacity combined with market demand. In addition, the company cancelled its subsidiary Huitong Clean Water on November 5, 2018, ending continuous losses and focusing on developing superior business and improving business structure.
Investment rating and valuation: combined with the annual report, we maintain the company's expected net profit of 95.32 million yuan and 107 million yuan respectively in 19-20 years, and increase the forecast net profit of 112 million yuan in 2021. The current stock price corresponds to 31 times the PE of 19 years, maintaining the "overweight" rating, looking forward to the landing of new businesses such as the company's membrane business and battery diaphragm.
