Events:
The company announced on the evening of April 26: 1) 2019 Annual report: during the reporting period, the company realized revenue of 1.933 billion yuan, an increase of 150.52% over the same period last year, and realized a net profit of 290 million yuan belonging to shareholders of listed companies, an increase of 72.31% over the same period last year. The net profit attributable to non-deduction was 274 million yuan, an increase of 82.82% over the same period last year. 2) the profit distribution plan for 2019 is to pay a dividend of 0.65 yuan for every 10 shares and increase 5 shares for every 10 shares of capital reserve; 3) for the first quarter of 2020, the revenue in the first quarter was 330 million yuan, an increase of 6.83 percent over the same period last year, and the attributable net profit was 63.1424 million yuan, an increase of 25.19 percent over the same period last year. The net profit after deducting non-shares was 62.6422 million yuan, an increase of 34.79 percent over the same period last year. In this regard, our comments are as follows:
Main points of investment:
In 2019, the net profit was 72.31%, and all business sectors showed a trend of growth.
The company's performance in 2019 is in line with market expectations, and the big increase is mainly due to the steady growth of each business. From a business point of view: 1) the operating business achieved revenue of 542 million yuan, an increase of 18.60% over the same period last year, and a gross profit margin of 66.74%, a decrease of 0.27pct over the same period last year. 2) the revenue of the engineering business reached 1.148 billion yuan, a year-on-year increase of 531.87%, mainly due to the merger of urban and rural areas of the China Railway acquired by the company. Due to the low gross profit margin of the urban and rural engineering business of China Railway, the gross profit margin of the company's engineering business was reduced from 7.87pct to 18.50%. 3) the equipment production and sales business realized revenue of 185 million yuan, an increase of 58.03% and a gross profit margin of 28.20%, which increased 3.89pct over the same period last year. Due to the obvious increase in engineering business, the company's overall gross profit margin fell to 33.43%, a decrease of 16.76pct compared with the same period last year. In terms of period expenses: the company's sales / management / R & D / financial expense rates are 1.57% 5.94% 1.24% 4.65%, respectively, reducing 1.29/4.17/0.49/5.67pct compared with the same period last year, and the expenses are well controlled during the period. The net cash flow of operating activities was-60.4277 million yuan, which was negative compared with 93.7974 million yuan in the same period last year, mainly due to the increase in project payments and mergers and acquisitions.
Operational attribute Q1 is limited affected by the epidemic, and its annual performance increases steadily without worry.
From the composition of the gross profit of the 2019 annual report, the gross profit of the company's investment and operation business accounts for 55.97%, the engineering business accounts for 32.85%, and the equipment and other business accounts for about 11.18%, highlighting the company's operational attributes. During the epidemic, 1) the water and solid waste operation business operates normally and will not be affected; 2) the key project to start construction in 2020 is the Heilongjiang project, which usually starts construction in mid-late April, so the impact of the engineering business is also limited; 3) the equipment business accounts for a relatively low proportion, with the end of the epidemic basically, the company can reduce the impact of delayed construction through overtime and other measures in the later stage. Therefore, the impact of the epidemic on the company as a whole is limited, sewage improvement and sludge business led the company's 2020Q1 net profit increased by 25.19%.
As a veteran water treatment enterprise, the company has a sound business style and did not participate in the vicious competition of PPP projects a few years ago, so its financial situation is good. With the improvement of the yield of some environmental protection projects, the company began to develop projects against the trend. In 2019, the company added 736.8764 million yuan of EPC orders, 340 million yuan of on-hand orders at the end of the period, and 833 million yuan of new franchise orders.
At the same time, the company has 548 million yuan (2020Q1) in hand, and the asset-liability ratio is only 43.59%. There is still a lot of room for financing, and the water business can rise steadily.
The organic solid waste business began to gain momentum. In 2019, the sludge business achieved revenue of 104 million yuan, a year-on-year increase of 71.55%. The Changchun project achieved a net profit of 22.3458 million yuan. Previously, the layout of the organic solid waste industry chain was further improved through the introduction of YM bacteria ultra-high temperature fermentation technology from Japan, acquisition of joint industry technology and joint Ma Sheng environmental organic solid waste industry chain. At present, 14 projects are in operation and are expected to gradually enter the performance realization period. In addition, with the auxiliary heating integrated organic solid waste fermentation equipment put into use, organic solid waste business is expected to promote replication in the country, creating a leader in the field of subdivision. The company's water business is steadily rising, the organic solid waste business is ready to start, and the annual performance is growing steadily.
Invest in Aidi Weixin to develop novel coronavirus vaccine to demonstrate social responsibility
On March 9, 2020, the company invested 18 million yuan to increase its investment in Beijing Aidi Weixin, holding a 4.7368% equity stake and enjoying a priority additional investment right of 12 million yuan. 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.
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 increasing equity and writing off previously repurchased shares. It is estimated that the company's 2020-2022 EPS will be 1.01,1.29,1.53 yuan respectively, and the corresponding share price PE will be 14,11,9 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.
