Policy benefits occur frequently, and there is a broad space for agricultural water-saving market.
With the formulation of the strategic plan for rural revitalization, the financial investment in rural construction is increasing, and the new mode of agricultural construction and operation of intensification and industrialization attracts more social capital to enter the "three rural areas". The trade war between China and the United States has given birth to domestic demand for quality agricultural products, while policies such as water price reform and land transfer speed up the landing of large-scale creative conditions for water-saving irrigation facilities. There is a broad space for agricultural water-saving market in the future.
Vigorously promote the "Yuanmou model" of efficient farmland water-saving operation, and build a new type of comprehensive agricultural service provider.
As a leading enterprise in the construction of water-saving irrigation, the company is a leader in order and technology industry. The traditional farmland water-saving industry has been characterized by scattered orders, low profit margin and lack of long-term stability. In order to solve these problems, the company first launched the farmland water-saving operation PPP "Yuanmou model" in Yuanmou, Yunnan Province, which integrates construction and operation, with remarkable demonstration results. The promotion of "Yuanmou model" can not only increase the company's operating profits and ensure the stability of performance and cash flow, but also operate farmland will be an important starting point for the development of comprehensive services for rural agriculture. Relying on the operation of farmland on hand, while the company provides efficient water-saving irrigation operation, it can develop more operational value-added services such as the integration of water and fertilizer, agricultural means of production and technical services, and the quality tracking and certification of agricultural products, and create a new type of comprehensive agricultural service providers. form a number of fee-based assets with stable operation and reliable cash flow. The company actively introduces the advanced ideas of Netfield, BABA, Huawei and other enterprises to rapidly develop and operate the area of farmland. We estimate that the company is expected to form a scale of 800000 mu of operating farmland by 2021, and the annual profit performance of water-saving operation and value-added services will exceed 280 million yuan, which is equivalent to rebuilding the performance volume of a company.
Sufficient orders provide stable support for performance and ensure the rapid growth of operating farmland.
In 2018, the company signed a new order of 4.5 billion yuan, an increase of 52% over the same period last year. From January to June 2019, the company (pre) won the bid with a total investment of 2.375 billion yuan, and the total investment in the project tracked as a whole exceeded 10 billion yuan. The continuous winning bid and landing of the project demonstrates the strong strength of the company in the field of agriculture and water affairs, and provides stable support for the performance.
Among them, a large number of farmland sewage orders similar to the Tianjin Wuqing sewage treatment project (investment 1.5 billion) will provide support for the company's short-term performance and help agricultural water-saving operations to quickly land PPP orders.
Maintain a "buy" rating
The management of the company is determined to forge ahead to create a new business model for rural agricultural integrated service providers while actively expanding overseas business. We slightly increase the company's 19-21 attributable net profit of 185x286 million yuan, corresponding to PE22/14/10X, maintain the "buy" rating, short-term stock price adjustment in place, once again focus on recommendation. The reasonable valuation of the company should be 7.2-9.0 yuan, which has 41% potential increase room for 76% of the current share price.
Risk hint: the project is advancing or falling short of expectations, and the increase in investment leads to financial shortage and policy risks.