Main points of investment:
The company's revenue is growing steadily. In 2019, the company achieved an operating income of 2.166 billion yuan, an increase of 21.71% over the same period last year; the net profit of shareholders belonging to listed companies was 129 million yuan, an increase of 29.17% over the same period last year; and after deduction, the net profit of shareholders of listed companies was 113 million yuan, an increase of 20.99% over the same period last year, corresponding to 0.16 yuan of EPS. From a quarterly point of view, the company achieved revenue of 852 million yuan in the fourth quarter, an increase of 80.59% month-on-month, helping the company maintain high performance growth.
High quality orders are obtained in China. Compared with previous years, the new orders obtained by the company in 2019 are more scientific and technological, pay more attention to integrated services, and have a large construction area, which requires overall cooperation. Contract water-saving plate, the company won the bid for Yongding River Basin agricultural water-saving project.
Farm service section, the company won the demonstration project of water and fertilizer integration in Queshan County and Wen County of Henan Province, impression Citrus Orchard in Kecheng District, Quzhou City, Zhejiang Province, Expo Garden Water and Fertilizer Integrated Irrigation Project, South Africa Hickory Irrigation Project and so on. In other sectors, the company won the bid for the poverty alleviation, development and water supply project of ecological migration in central Gansu.
Overseas markets are expanding steadily. With the Israeli company as the origin, the company will strengthen cooperation in talent, technology, channels and other aspects with excellent irrigation enterprises overseas to gradually expand its international market share. In September 2019, the company signed a strategic cooperation agreement with Maze, Israel's third largest irrigation company, to jointly explore ways to strengthen technology in China's agricultural market and drip irrigation projects. In December of the same year, as a member of the expert Committee of the United Nations Economic Commission for Europe, the company was invited to attend the third meeting of the working Group of the United Nations Economic Commission for Europe, which adopted the introduction of the "Yuanmou model". It shows the Chinese plan, concept and wisdom of government and social capital cooperation in the context of the new era.
Operating costs increased slightly and gross profit margin decreased slightly. In 2019, the company's operating costs increased by 24.5% year-on-year, reducing the overall gross profit margin by 1.64 percentage points. In terms of products, the scale of agricultural water science and technology sales and services expanded rapidly, with revenue growing by 46.41% year-on-year, accounting for 30.3% from 25.19%, while costs also increased by 56.46% year-on-year. The overall share of agricultural water informatization and project operation services is relatively low, but the revenue and cost growth rates are as high as 86.78% and 85.77% respectively. The increase in costs caused by the expansion of the scale of business is the main reason for the slight decline in gross profit margin.
Profit forecast: we predict that the net profit attributed to the parent company from 2020 to 2022 will be 161 million yuan, 202 million yuan and 232 million yuan respectively, and the corresponding EPS will be 0.20,0.25,0.29 yuan respectively. The current stock price corresponding to the PE is 23.7ppm 18.8pm 16.4 times, and the current valuation is still in a historically low range. Considering that the bidding progress of government customers was delayed due to the epidemic in the first quarter, the procurement construction was restricted and the performance declined, and the "prudent recommendation" rating was given for the first time.
Risk hints: the risk that the epidemic will continue to affect the progress of bidding and construction; the risk of a decline in the prosperity of the industry; and the systemic risk of the capital market.