This report is read as follows:
The company has independent intellectual property rights of R & D and production of reverse osmosis membrane (RO), which is mainly used in household water purifier, seawater desalination and other high-end water treatment separation links.
Main points of investment:
Investment advice: due to the lower-than-expected progress in the promotion of household water purifiers and the decline in gross profit margins of major products, the profit forecasts for 2019-2021 are 0.24,0.26 and 0.26 yuan, respectively, EPS. Considering the company's high technical barriers, it was given 30 times PE in 2019, lowered the target price to 7.20 yuan per share (- 31%), and the rating was downgraded to "prudent overweight".
The company's main performance contribution comes from RO film sales and household mattresses. The company's largest shareholder, CRRC Industry Investment holding 42.64% of the listed company, is a wholly-owned subsidiary of CRRC Group. The actual controller of the company is SASAC of the State Council. At present, the performance comes from time Wharton, a wholly-owned subsidiary of ①, and its main business is RO film research and development, manufacturing and sales. It is a reverse osmosis membrane and nanofiltration membrane manufacturer with the leading technical level and the largest operation scale in China. it has the production capacity of more than 50 membrane products, such as low pressure, extremely low pressure, ultra-low pressure, anti-pollution and nanofiltration, ② Guizhou Nature subsidiary (holding 56.44%), mainly engaged in the production and sales of brown fiber mattresses. ③ Wudang Park Rental.
Reverse osmosis membrane technology has broad prospects: the company has independent intellectual property rights of reverse osmosis membrane research and production, and as the company's main source of performance. Reverse osmosis membrane is mainly used in seawater desalination, household water purifier and industrial water treatment and other fields, with the help of external pressure to achieve the separation of water from pollutants and salt, with high technical barriers. At present, the company is the only enterprise in China with independent R & D and production capacity of RO membrane.
Shawen Phase II has been put into production and is expected to boost the company's performance after reaching production: in 2018, the company's Shawen RO film new base completed the acceptance of part of the infrastructure and entered the commissioning stage. On the basis of the existing RO production capacity of 14 million square meters and ultrafiltration membrane production capacity of 3 million square meters, the production capacity of nanofiltration membrane and plate ultrafiltration membrane increased by 4.8 million square meters and 1 million square meters respectively. The expansion of the product line will become an important driving force to boost the company's performance in the next two years.
Risk hint: affected by the trade war, there is some uncertainty in the overseas expansion of the company's reverse osmosis membrane.
