I. Analysis and judgment
Closely around the water, Tianjin project brings 19 years of NB meter rapid expansion company is a water meter industry veteran enterprises, but also one of the earliest engaged in intelligent water meter manufacturing and promotion of one of the leading enterprises. The overall strategy takes scientific water use and healthy drinking water as the main line, and is committed to providing intelligent water services solutions for water supply enterprises and even the whole city. 2019 is the first year of 5G application. The maturity of technology, the reduction of module cost and the large-scale construction of base stations have solved the industry problems that it is difficult to popularize smart water meters quickly in the past. During the year, the government and water department of the economically developed areas led by Tianjin began to carry out large-scale bidding for smart water meters. The company won the market share of 1.05 million units in the Tianjin project, bringing smart water meter revenue of + 91% year-on-year in 2019, and is expected to fully benefit from the wave of smart water meter replacement in the future.
Fully understanding the needs of the Water Department, the Yingtan project has achieved good results.
In 2013, the company acquired 22% of Yingtan Water supply Co., Ltd. through public equity transfer, and entered the downstream water supply field. Yingtan City, positioned as a benchmark city of the Internet of things, has accelerated the replacement of NB-IoT smart water meters since 2017, and has basically achieved full coverage of smart water meters. According to the results of our grass-roots research, through the application of intelligent water meters and intelligent water systems, the leakage rate of Yingtan water supply network has been reduced from 25% in the past to 12%, and the annual leakage has been reduced by nearly 4 million tons. According to the estimated water supply cost of 1 yuan per ton, the related cost has been reduced by more than 4 million, which has played a good demonstration effect.
Positive extension mergers and acquisitions steady growth, layout environmental protection to create new growth points due to better operating payback, the company's financial situation is good, the asset-liability ratio is only 12%, and there is plenty of cash on hand, which provides sufficient capital reserves for the sustainable layout of the environmental protection industry in recent years. Larger acquisitions include the acquisition of a 20 per cent stake in Zhongxian Tianma with 72 million of its own funds in 2018 to enter the rare earth recycling industry. The acquisition of Tianma optimizes the efficiency of the company's resource allocation, and is expected to continue to focus on the environmental protection industry in the future, providing more growth points for the company's development.
II. Investment suggestions
In 2019, the sales of the company's NB meter increased by nearly 400% compared with the same period last year. We are optimistic about the continuous expansion of smart water meters in the future and the company's development strategy of focusing on water. It is estimated that the EPS in 2019-2021 will be 0.24 EPS 0.28 pm 0.32 respectively, corresponding to the current stock price PE 22 pm 19x16x, which is consistent with the average forecast PE of comparable company 22x in 2020, considering that the company's leading position in the industry should enjoy a certain valuation premium. At the same time, the process of improving the permeability of smart water meters is expected to last for 6-8 years, maintaining the "recommended" rating.
Third, risk tips
1, the promotion of smart water meters is not as expected; 2, the extension growth is not as expected; 3, the risk of recovery of accounts receivable.