Items:
The company has won the bid for the river reservoir connection planning in Midu County, Dali Prefecture, Yunnan Province (Phase I). The government and social capital cooperation project has a total investment of 195 million yuan. The project construction content mainly includes water transfer project, water distribution project and field project. The construction area is about 50,000 mu, of which the construction period is one year and the operation period is 20 years.
Guoxin point of view:
The "Yuanmou" model of high-efficiency and water-saving farmland PPP brings tangible benefits to farmers, accelerates replication, and the company's operating assets accumulate rapidly. we estimate that the water-saving operating area in 19-21 is expected to reach 10,000 mu in 20-35-50. Efficient and water-saving farmland operation can not only increase the company's operating profits, ensure performance stability, and provide stable cash, but also will be an important starting point for the development of comprehensive services for rural agriculture. The management of the company has made a smooth transition through more than a year of integration, a clear strategy, vigorously introducing talents, and is expected to quickly promote a new business model under the leadership of the new leadership. Based on the soundness of the traditional water-saving EPC business, the company also provides strong performance support for rural sewage and water supply projects in hand, such as Tianjin Wuqing. At the same time, the company's water-saving PPP projects are advancing rapidly, and the volume of operating farmland is growing rapidly, providing stable support for the company's operating profits and cash flow. We estimate that the company's net profit for 2019-2021 is expected to be 1760.274 million yuan respectively, corresponding to PE times that of 27-18-12, maintaining the buy rating.
Comments:
The "Yuanmou" model of high-efficiency and water-saving farmland PPP brings tangible benefits to farmers, accelerates replication, and the company accumulates operating assets rapidly.
In China, the company is the first to promote the demonstration effect of "Yunnan Yuanmou Model" for efficient and water-saving operation of farmland. Since 2016, the company has concentrated on the field of water-saving PPP. The company first successfully established the industry's first PPP benchmark through the pilot project of innovative mechanism of medium-sized irrigation district in Luliang, Yunnan, and then verified on the 114000 mu high efficiency water-saving irrigation project in Yuanmou large irrigation district of Yunnan. Through the joint investment of social capital, water users and the government to build efficient farmland water-saving facilities, run by the social capital side, collect water fees from farmers to help farmers increase the output value of cash crops. This model for structural water shortage areas can help farmers quickly overcome the problem of farmland water use, plant high value-added economic role, improve income, has been affirmed by all parties, and achieve win-win results.
Since then, the company's farmland water-saving PPP "Yuanmou" model has been popularized in Xiangyun (50,000 mu, under construction), Binchuan (60,000 mu, under construction), Chengjiang, Ningxia (225000 mu, under construction), Wushan, Gansu (41600 mu) and Yunnan Maitreya (50,000 mu). At present, the total area of the project in hand exceeds 500000 mu. At present, it has initially formed an intensive effect in Yunnan Province, and expanded its business to Ningxia, Gansu, Chongqing and other places, with a steady increase in operating assets. By the end of 2018, the company's Yuanmou project has an operating farmland area of 76000 mu, and we expect the water-saving operating area to reach 20 mu in 19-21. Based on the conservative operating profit of RMB 250 / mu / year, the annual operating profit of 500000 mu of operating farmland can reach 125 million yuan.
Water-saving operation farmland occupies the entrance of rural services for the company, which can be used to expand a series of agricultural value-added services.
Efficient and water-saving farmland operation can not only increase the company's operating profits, ensure performance stability, and provide stable cash, but also will be an important starting point for the development of comprehensive services for rural agriculture. The service of farmers has always been a difficult problem, the circulation cost of agricultural means of production is high and lack of stability. The company can rely on the cash crop farmland operation project in hand, while providing farmers with efficient water-saving irrigation, develop more operational value-added services such as the integration of water and fertilizer, technical guidance for planting cash crops, monitoring and prevention of diseases and insect pests, tracking and certification of agricultural products quality, and at the same time, through the information technology of the Internet of things in farmland, further construct the intelligent operation and maintenance service system of modern agriculture. Thus a number of charge assets with stable operation and reliable cash flow are formed. Taking the integration of water and fertilizer as an example, the intermediate cost of chemical fertilizer for farmers is high, and the company cooperates directly with chemical fertilizer suppliers to reduce the cost of chemical fertilizer. at the same time, through fertilization through water-saving irrigation system, the amount of chemical fertilizer is reduced and environmental pollution is reduced.
At present, the head Internet enterprises, such as BABA, are aiming at the rural agricultural service market, but they are unable to sink to individual farmers because of their lack of grasp, forming a large-scale effect. The water-saving operating assets in the hands of the company is an entrance that others cannot copy, through which a series of agricultural value-added services are expected to be launched smoothly. So, on the other hand, the company's business model is expected to create a new situation in agricultural services.
The revitalization of the countryside is the key direction of policy support, and the financial support of the company's project is high.
Rural revitalization is the key support direction of the state, while high-efficiency and water-saving agriculture is supported by central funds every year, and agricultural and rural projects are also the key loans of policy banks. For the operation of PPP projects signed by the company, the capital part will receive strong support and cooperation from local funds, and the company will pay a low proportion of actual contributions, which will be gradually recovered after completion and operation in the future, while the bank loan part will usually be given priority to be approved and get a very low interest rate. Therefore, the company's operation of water-saving PPP project promotion is very little affected by funds, can be quickly promoted.
Investment suggestion: the new business model seizes the vast rural agricultural service market, and is expected to grow into an agricultural service giant.
The management of the company has made a smooth transition through more than a year of integration, with a clear strategy, and is expected to quickly promote a new business model under the leadership of the new leadership. Vigorously introduce talents, target international first-class water-saving company Netafim, introduce its core executive team, Asia-Pacific Operations Director and China head JoshuaSpector has been in place, follow-up high-end talents will be in place one after another, laying the foundation for the company to achieve cross-regional development. Based on the soundness of the traditional water-saving EPC business, the company also provides strong performance support for rural sewage and water supply projects in hand, such as Tianjin Wuqing. At the same time, the company's water-saving PPP projects are advancing rapidly, and the volume of operating farmland is growing rapidly, providing stable support for the company's operating profits and cash flow. We estimate that the company's net profit for 2019-2021 is expected to be 1760.274 million yuan respectively, corresponding to PE times that of 27-18-12, maintaining the buy rating.
Risk hint: the project starts or falls short of expectations