Leading water service in the suburbs of Tianjin, with a complete industrial chain, backed by state-owned enterprises, with significant capital location advantages
The company has a complete closed loop of water supply and drainage operations from raw water intake to tap water production and delivery to sewage treatment. After acquiring Jiacheng Environmental Protection, the company accelerated its layout in the Beijing-Tianjin-Hebei water supply and drainage market. In 2018, the newly acquired subsidiaries covered all districts and counties of Tianjin, Tangshan, Hebei, Shijiazhuang and other regions, forming a synergistic and complementary effect with the parent company, providing a good opportunity to further open up the Hebei water treatment market. Furthermore, the company's state-owned capital holding ratio exceeds 43%, which can provide strong financial support and facilitate the successful implementation of the company's water projects. In the past two years, the company's business volume in Hebei has surged, and engineering and sewage projects have developed rapidly, providing support for performance growth; the overall operation is steady, and the balance ratio is around 50%.
The Tianjin water market has broad space, and the Beijing-Tianjin-Hebei water environment market has great potential
There is a serious shortage of water resources in Tianjin. Water demand is forcing the development of the water supply business. There is broad market space in the future. According to estimates, there is room for investment in the Tianjin water supply gap market in the future. The amount of water resources per capita in the Beijing-Tianjin-Hebei region is lower than the national average. The Haihe River Basin, the main source of water, is moderately polluted, and the poor Class V water quality is far higher than that of other provinces.
Continued progress in the construction of Xiong'an New Area will force the regional sewage treatment market space to expand further, and the scale of sewage treatment market investment in North China as a whole will be around 250 billion dollars. There is still some room for water price adjustments, which will benefit enterprises integrating water supply and drainage.
Based on water supply, the company increased sewage treatment, increased R&D to ensure business development
In 2018, the company's raw water and tap water sales increased 9.58% and 27.15% year-on-year, and the production and sales rates reached 99.87% and 91.6% respectively. The high production and sales rate was the best reflection of the company's leading comprehensive management level and extensive market sales channels. However, after the company acquired Kacheng Environmental Protection in recent years, with Kacheng's technology and channels, the sewage treatment business showed explosive growth. The compound annual revenue growth rate reached 152.56%, which became a new important fulcrum for the company's performance acceleration. The company focuses on technology research and development, increases investment in R&D, and continuously increases the proportion of R&D personnel and the conversion rate of R&D results, providing stable technical support for the expansion of the water supply and drainage business.
Give an “increase in holdings” rating
The company's revenue for 19-21 is estimated to be 18.2/20.7/2.17 billion, net profit attributable to 0.69/0.86/93 million yuan, annual profit growth rates of 16.0%/23.6%/8.0% respectively, and earnings per share of 0.20/0.24/0.26 yuan respectively. The corresponding valuation is 41/33/31X. The company's valuation is currently above the industry average. Considering the small size of the company, the sewage and engineering business is expected to grow rapidly this year with internships. Give it an “increase in holdings” rating.
Risk warning: Project progress or falling short of expectations, increased investment led to financial constraints, policy risks
