This report is read as follows:
Jiangnan Water is a municipal water platform under Jiangyin State-owned assets Supervision and Administration Commission. Its water supply and sewage disposal capacity has remained stable over the past five years, and the engineering sector is the main source of performance fluctuations. The commissioning of the Qinwangshan hazardous waste project in 2019 will boost performance.
Main points of investment:
Investment suggestion: the company's 2019-2021 net profit is expected to be 225 million yuan, 245 million yuan and 255 million yuan respectively, corresponding to 0.24,0.26 and 0.27 yuan per share respectively. With reference to the average valuation level of the industry, and considering the greater flexibility of the performance of the company's engineering sector, the company is given 16 times PE in 2019, with a target price of 3.84 yuan per share, covering for the first time and giving a neutral rating.
Jiangyin City State-owned assets Supervision and Administration Commission's water affairs platform: the first and second major shareholders of the company are Jiangyin Urban and Rural Water supply and drainage Co., Ltd. And Jiangyin Common assets Management Co., Ltd., both of which are wholly-owned enterprises under Jiangyin City State-owned assets Supervision and Administration Commission. 35.19% and 23.18% of listed companies are owned respectively.
The fluctuation of performance mainly comes from the engineering service sector: as the water platform of Jiangyin State-owned assets Supervision and Administration Commission, the company's performance mainly comes from three sources: ① water supply: the company's production capacity has been maintained at 1.16 million tons per day in the past 5 years (Xiaowan 30wt/d, Xiaoshan 60 wt/d, Chengxi 20 wt/d and Ligang 6wt/d), with little fluctuation in revenue and profit contribution. ② project installation: the company has the second-class qualification of municipal engineering construction general contractor, which mainly involves engineering services such as pipe network and secondary water supply, and is the main source of the company's performance fluctuation. ③ sewage disposal: the production scale of the company in the past five years is: total asset capacity 3.5 wt/d, equity participation 30% Everbright water production capacity 19 wt/d, performance fluctuation is small. As the company's Qinwangshan industrial solid waste disposal project was granted a hazardous waste management license in January 2019, it will bring new performance growth momentum.
Proposed acquisition of municipal utilities in Jiangyin: in July 2018, the company announced the acquisition of municipal utilities in Jiangyin, to promote the marketization of relevant municipal drainage networks and supporting assets in Jiangyin, and Jiangyin Municipal Government will solicit opinions on this matter in June 2019. Asset injection helps the company expand its business and boost performance growth.
Risk hint: the pipe network engineering demand of the engineering installation plate and the profitability of the industrial solid waste disposal project are uncertain after they are put into production.
