To ensure food security, the state will step up the construction of farmland infrastructure.
With the rise in the prices of agricultural products, the importance of food security has been highlighted. 1) Maize supply is tight, and corn prices continue to rise rapidly. as of August 4, the average purchase price of corn has reached 2218 yuan, up 21% from 1833 yuan / ton at the end of 2019, and has a further upward trend. It is expected that the tight situation of corn supply and demand may further intensify in 2021, and corn prices may rise further. 2) the prices of wheat and rice have also risen driven by the rise in corn prices. 3) the conflict between China and the United States and the global epidemic have further highlighted the importance of domestic food security.
The construction of high-standard farmland and efficient water-saving irrigation is expected to be accelerated. According to the national strategy of "storing grain in the land and technology", we believe that the transformation of farmland through modern agricultural technology to improve farmland production efficiency is an important part of the national food security strategy. The state completed the construction of 560 million mu of high-standard farmland by the end of 2018, with an average annual increase of 80 million mu from 2017 to 2020, and is expected to achieve 800 million mu of high-standard farmland in 2020. according to the national plan, it will reach 1 billion mu in 2022 and is expected to increase by 100 million mu per year from 2021 to 2022, an increase of 25% over 80 million mu. The average investment of high-standard farmland is about 1500 yuan per mu, and the annual market size of this item alone is as high as 150 billion.
As the absolute leader in the field of high-efficiency and water-saving irrigation project, the company has accelerated the growth of orders and is expected to meet the inflection point in the third quarter.
The company's business has extended from water-saving irrigation to intelligent water affairs, sewage treatment, safe water supply, water ecological restoration and other fields, integrating regional ecological planning and design, project construction, product supply, intelligent project operation services as one of the system solution integration solution provider. The company has remarkable advantages in the industrial chain, and in recent years, through cooperation with local water companies and water investment companies, the national market layout has been initially completed. Under the background of the state increasing investment in agriculture and rural areas, the company's orders continue to grow rapidly. Up to now, the company has added 2.3 billion yuan of new orders in 2020, which has exceeded 200 million yuan for the whole of last year. In the first half of the year, affected by the COVID-19 epidemic, the company's construction was affected, and the growth rate of revenue and profits was impaired. It is expected that with the elimination of the impact of COVID-19 's epidemic, the company's performance is expected to usher in an inflection point in the third quarter, and is expected to continue high growth.
Acquire equity of Huitu technology, layout water conservancy information, promote the upgrading of the company's business model, Huitu science and technology is China's leading water conservancy information enterprise, with an income of 237 million in 2019, the company already holds nearly 30% of the equity of drawing technology. the company announced that it will further increase its stake to more than 50% in the future. Through the acquisition of Huitu Technology, it will significantly enhance the company's strength in the field of water conservancy information, form effective coordination with the company's original business, promote the upgrading of the company's overall business model, and help the company to obtain more effective orders. and is expected to improve the company's profitability through the grafting of information capabilities.
Give a "buy" rating:
In view of the current importance of food security, the country is expected to increase investment in farmland in the future. We raised the company's future order expectations so as to increase the company's income from 27.30 to 37.174.827 million in 2020-2022, with a year-on-year growth rate of 28.56%, 33.48% and 29.87%. The homing net profit was raised from 1.81 Universe 2.45 million to 2.03 million, with a year-on-year growth rate of 56.96%, 49.91%, 47.14%, corresponding to only 20, 13 and 9 times of PE, and continued to be rated as "buy".
Risk hint: national policy change; the arrival of the company's order is not as expected; foreign competitors enter.