Events:
The company released its 2019 results KuaiBao on the evening of February 28: during the reporting period, the company realized revenue of 1.931 billion yuan, an increase of 150.20% over the same period last year, and realized a net profit of 290 million yuan belonging to shareholders of listed companies, an increase of 72.52% over the same period last year. The net profit after deduction was 270 million yuan, an increase of 80.22% over the same period last year. In this regard, our comments are as follows:
Main points of investment:
The performance increased by 72.52%, in line with market expectations, and the growth was mainly due to the contribution of the engineering business.
In 2019, the company achieved a net profit of 290 million yuan belonging to shareholders of listed companies, an increase of 72.52% over the same period last year, which was within the range of 2.90-305 million yuan in the previous performance forecast, which was in line with market expectations. The net profit increased significantly in 2019, on the one hand, the number of reconstruction and expansion projects in the project contracting business increased, which made the profit increase more than that of the same period last year, on the other hand, it was due to the receipt of some accounts receivable.
The water business is rising steadily, and the organic solid waste business is ready to start.
As a veteran water treatment enterprise, the company has a water operation scale of 151.4 million tons per day (including water supply), and is under construction and proposed to build 746 million tons per day. The compound growth rate of gradual operation in the next two years is 22.18%. The company has a sound business style and did not participate in the vicious competition in the PPP project a few years ago, so its financial situation is good. With the increase in the yield of some environmental protection projects, the company began to develop projects against the trend. The number of new orders in 2019 was 2.72 times that of 2018, leading to a 72.52% increase in net profit. The company has a monetary capital of 500 million yuan on hand, and the asset-liability ratio is only 39.95%. There is still a lot of room for expansion, the new refinancing rules fall + interest rates go down, and the financing environment of the environmental protection industry continues to improve, which brings great development opportunities to the company. Water business is stable and can be improved.
While the company is based on water business, it is also actively arranging solid waste business. The introduction of ultra-high temperature fermentation technology of YM bacteria from Japan + the acquisition of joint industry technology + join hands with Ma Sheng Environment to enter the field of organic solid waste disposal to deal with sludge, kitchens, livestock and poultry manure, etc., there are already demonstration projects in Changchun Nongan, Fuzhou, Beijing Nangong and other places, and it is expected to promote replication throughout the country in the future, create a leader in subdivision fields, and organic solid waste business is ready to start.
It is proposed to invest 30 million yuan to increase investment in Aidi Weixin to develop novel coronavirus vaccine.
The company plans to invest 30 million yuan to increase its capital in Beijing Aidi Weixin, after the completion of the capital increase will hold its 7.89% stake. Aidi Weixin focuses on genetic engineering vaccine, DNA vaccine and new vaccine adjuvant technology, and has international technical advantages in the field of vaccine research and development. at present, it has three core varieties: RSV preventive vaccine, hepatitis B therapeutic vaccine and type 1 diabetes therapeutic vaccine. In January 2020, Aidi Weixin joined hands with Nasdaq Inovio to develop novel coronavirus vaccine, which intends to use DNA vaccine rapid response technology to enter clinical trials in China in a short period of time.
Jiangsu Peng Harrier Pharmaceutical Co., Ltd., which is owned by the company's major shareholders, has a history of more than 50 years and has rich experience in the pharmaceutical field. The company invested in Aidi Weixin this time. On the one hand, based on the past experience of the pharmaceutical industry, it supports novel coronavirus's vaccine drug R & D and production enterprises related to epidemic prevention and anti-epidemic, and expands investments outside its main business. On the other hand, it is also aimed at the current severe epidemic situation of novel coronavirus, which can enhance the level of domestic vaccine research and development, enhance the message of people protesting the epidemic, and highlight the company's high sense of social responsibility.
The impact of the epidemic of operational attributes is limited, and the target of low valuation and high growth has long-term investment value.
From the proportion of the company's gross profit in recent years, we can see that the company's operating business accounts for about 70%, engineering business accounts for 20%, and equipment and other businesses account for about 10%, highlighting the company's operational attributes. During the epidemic period, 1) the water and solid waste operation business operates normally and will not be affected; 2) the engineering business is mainly for the reconstruction and expansion of the company's projects, and does not undertake external engineering business. The key project to start construction in 2020 is the Heilongjiang project. Construction usually starts in mid-late April, so the impact of engineering business is limited. 3) the proportion of equipment business is relatively low, and with the end of the epidemic, the company can reduce the impact of delayed construction through measures such as overtime in the later stage. Therefore, the impact of the epidemic on the company as a whole is limited.
The company recently announced that it intends to buy back 100 million yuan to 200 million yuan of shares. as of February 17, the company has bought back 134.5005 million yuan (excluding transaction costs), with an average repurchase price of 13.72 yuan per share. at the same time, equity incentive performance assessment in December 2019 showed a compound growth of 30% in the next three years, reflecting the company's confidence in future development. We expect the company's net profit to grow by 71% and 30% respectively from 2020 to 2021, with a valuation of 13% and 10 times, with low valuation and high growth, with long-term investment value.
Profit forecast and investment rating: maintain the company's "buy" rating. The company's water business is growing steadily, and the organic solid waste business is ready to start. We are optimistic about the company's development prospects and do not consider the impact of buyback and investment on the company for the time being. It is estimated that the company's 2019-2021 EPS will be 0.60,1.04,1.34 yuan respectively, and the corresponding share price PE will be 22,13,10 times, maintaining the company's "buy" rating.
Risk hint: share buyback and investment Aidi Weixin can not successfully complete the risk, the risk of project acquisition and promotion is not expected, the risk of a substantial increase in accounts receivable, the risk of slow progress of organic solid waste recycling projects, macroeconomic downside risks.
