Main points of investment:
The company announced its quarterly report in 2019 that its total revenue in the first quarter was 98.9677 million yuan, an increase of 61.53% over the same period last year, and its net profit was 28.7961 million yuan, an increase of 304.51% over the same period last year. At the same time, the company expects to report a net profit of about 57 million yuan to 70 million yuan in mid-2019, an increase of 265.82% to 349.26%.
19H1 expects performance growth mainly from: 1. With the support of national policies, the company's energy conservation, environmental protection and Internet marketing go hand in hand, with a large increase in business volume compared with the same period last year; 2. The company has strengthened the management of accounts receivable and increased the intensity of reminders, especially the return of long-aged loans, and the asset impairment loss calculated according to the new financial instrument criteria is expected to decline compared with the same period last year. 3. The company strengthens the cost management, strictly controls the expenses of the management department, and is expected to reduce the management expenses compared with the same period last year.
The anti-wear and anti-corrosion business has warmed up, and the orders for garbage incinerator protection business have increased rapidly. Under the influence of the national supply-side reform, the anti-wear and anti-corrosion business has experienced a low point in the industry environment for two years. With the improvement of the profitability of enterprises in the downstream steel, cement, electric power and petrochemical industries, the anti-wear and anti-corrosion market is gradually picking up. With the rapid growth of the number of new waste incinerators in China, the company's waste incinerator protection business is on the right track in 2018. The company has established strategic cooperation with Shanghai Kang Heng Environment, Green Power Environmental Protection Group and other domestic large-scale garbage stove construction and operation units to enhance market competitiveness.
Industrial noise reduction business has achieved rapid growth. The main body of the company's acoustic noise reduction business is Evergrande Acoustics Co., Ltd., whose operating income is 40.29 million yuan and net profit is 5.35 million yuan in 2018. Benefiting from the formal implementation of the China Environmental Protection tax Law on January 1, 2018 and Evergrande Acoustics Company's second-level qualification for contracting environmental protection projects, the number of bidders has increased significantly in 2018, with a cumulative winning amount of more than 70 million yuan from January to November. In the future, with the rigid demand of industrial enterprises for noise control, we judge that the company's business volume is expected to grow rapidly.
Buybacks are used in employee stock ownership or equity incentive plans. The company intends to buy back 2000-40 million yuan of company shares for employee stock ownership plan or equity incentive plan, the repurchase price shall not exceed 10 yuan per share. As of April 30, 2019, the company had repurchased 1136000 shares, accounting for 0.37% of the company's total share capital. The highest transaction price was 6.39 yuan per share, the lowest transaction price was 5.98 yuan per share, and the total amount paid was 6.96 million yuan (excluding transaction fees). We believe that this share buyback demonstrates the confidence of the company's management in the future development.
Profit forecast. We estimate that the company's net profit from 2019 to 2021 will be 120 million yuan, 157 million yuan and 191 million yuan respectively, and the diluted EPS will be 0.39 yuan, 0.51 yuan and 0.62 yuan respectively. We give the company 20-25 times PE in 2019, corresponding to a reasonable value range of 7.80-9.75 yuan, which is better than that of the big city.
Risk hint. Orders fell short of expectations; downstream demand slowed.