Events:
Recently, the company's convertible bond issuance plan, the total amount of funds to be raised will not exceed RMB 425 million, which will be used to invest in Kawagaxing's annual production of 350 sets of air flotation system construction project (298 million) and repay bank loans (127 million). The maturity of convertible bonds is 6 years, and the conversion period begins on the first trading day six months after the end of the issuance of convertible corporate bonds to the maturity date of convertible corporate bonds.
Comments:
Issuing convertible bonds for air flotation system construction projects will help to strengthen the core competitiveness in the field of water treatment and increase new profit growth points. 298 million of the funds issued in this convertible bond will be used to invest in the construction project of Kawagaxing's air flotation system with an annual production capacity of 350 sets. The air flotation equipment produced by this project can be widely used in oil refining, chemical industry, brewing, vegetable oil production and refining, slaughtering, electroplating, printing and dyeing and other industries, removing solid suspended solids, oils and various gels in industrial and municipal sewage, which is conducive to the protection and treatment of the ecological environment. Promote the upgrading and technological upgrading of domestic sewage treatment equipment. This fund-raising investment project is based on the dissolved air flotation (DAF) technology with the most core competitiveness of Austria KWI, a wholly owned subsidiary of the company, integrating the accumulation of the company's original technology and absorbing foreign advanced technology for localization. It will help to further consolidate the company's core competitiveness in the field of water treatment, enrich the product line of water treatment business, and the smooth implementation of the project will also bring new profit growth points for the company.
Part of the funds of convertible bonds are used to repay bank loans, which helps to control financial risks and improve profitability.
The company plans to use 127 million of the funds raised to repay bank loans. At present, the scale of corporate debt is relatively high. By the end of September 2019, the company's short-term loan balance is 472 million yuan, non-current debt balance due within one year is 217 million yuan, long-term loan balance is 880 million yuan, bond payable balance is 498 million yuan, asset-liability ratio is 61.24%. Due to the high scale of debt, the increase in financial expenses reduces the company's profit level to a certain extent. Raising funds to repay some bank loans will help to reduce the company's asset-liability ratio, maintain a sound financial structure, reduce financial risks, and then improve the company's profitability.
To build an integrated environmental protection service provider from a global perspective, the localization of overseas technology is expected to help improve the performance and "prudent recommendation" rating. The company started as water treatment business, and in the past few years, through the development strategy of the combination of endogenous development and epitaxial mergers and acquisitions, it has formed the main business pattern of four sectors. including industrial water treatment, municipal water treatment, solid and hazardous waste treatment business and energy business. In recent years, the company has successively acquired a 100% stake in Austria's KWI, an international leader in dissolved Air floatation (DAF), and controlled Germany's ItN Nanovation AG, which owns the core technology of Nano-flat Ceramic membrane (CFM), to build the company's core competitiveness from a global perspective. We are committed to building a comprehensive environmental protection service provider specializing in intelligent and omni-directional technology solutions in municipal, environmental protection, seawater desalination, intelligent sponge city, zero emission and energy. Several overseas companies acquired by the company have strong competitive core technology, and the localization of overseas advanced technology in the future is expected to help the company to further improve its performance. The company's 18-20 performance is expected to be 1.28,1.36 and 143 million yuan, corresponding to the 19-year PE valuation of 24.8 times, maintaining the "prudent recommendation-A" rating.
Risk tips: project schedule is not up to expectations, accounts receivable recovery risk, overseas project political and other uncertain risks, financial expense rate is too high risk, high proportion of major shareholders pledge risk.