This report is read as follows:
Fresh Environment, as an innovative enterprise started by the R & D team, has relied on independent SPC-3D technology to complete the corner overtaking of the industry. At present, the company pays equal attention to engineering and operating business, and cash return has been significantly improved.
Main points of investment:
6. Investment advice: the company benefits from a significant improvement in cash return, and the reduction in financial expenses in 2019 will increase the company's performance. It is estimated that the EPS from 2019 to 2021 is 0.50,0.51 and 0.49 yuan respectively. With reference to the average valuation level of the industry and a certain operating performance premium, 17 times the dynamic PE in 2019, with a target price of 8.50 yuan per share. Cover for the first time, give cautious overweight rating.
7. Clean environment is the technological innovation leader in the environmental protection smoke treatment industry: as a technological innovation company pioneered by the technology R & D team, the company launches exclusive SPC-3D technology when the flue gas standard is raised to ultra-low emission in the power industry, which quickly completes the corner overtaking and makes the market share rise rapidly. The company is actively expanding the BOT business of flue gas treatment. At present, the market share of desulphurization and denitrification franchise scale is 14%, ranking third in the industry. The business strategy of attaching equal importance to engineering and operation can effectively smooth the performance impact of engineering business fluctuations and provide a stable cash return.
8. With the improvement of cash return and the reduction of financial costs, profits will be thickened: with the transfer of the flue gas treatment engineering service market to the non-electricity sector in 2018, competition in the industry has intensified, such as a decline in gross profit margin and a slowdown in payback. Although the company's net profit fell by 19.45% in 2018 compared with the same period last year, the net cash flow of the company's operating activities has increased significantly since 2018, with a net flow of 1.062 billion yuan for the whole year of 2018, reflecting the company's awareness of selecting downstream customers and controlling the risk of debt and capital chain. A decline in interest-bearing debt will help reduce financial costs and increase profits.
9. The change of the actual controller may usher in a new opportunity for development: in April 2019, the controlling shareholder, Beijing Century, plans to transfer 25.31% of the shares of the company to Guorun Environment. After the transfer, the controlling shareholder of the company will become Guorun Environment. The actual controller will be changed to Sichuan SASAC. As a state-owned holding enterprise or ushered in a new space for the development of environmental protection business.
10. Risk hint: with the completion of the centralized transformation of the flue gas treatment market in power and non-electric pollution industries, the performance growth of the company's engineering service sector will be under certain pressure.