Incidents:
The company disclosed its semi-annual report, achieving revenue of 733 million in the first half of the year, -13.07% year on year, and net profit of 27.08 million to the mother, or -59.72% year on year.
The company's semi-annual performance declined due to the COVID-19 pandemic, but the year-on-year reversal in the second quarter was already sharp!
Affected by the COVID-19 epidemic during the reporting period, the commencement of most of the company's projects other than the northwest regional market was delayed. Settlement of completed construction projects was also delayed due to on-site reasons, and government tendering projects were also delayed accordingly due to the impact of the epidemic. However, fixed expenditure items such as wages, depreciation and amortization, and interest expenses for the company's employees were basically the same as the same period last year. As a result, the company's revenue and profits declined in the first half of the year. However, looking at the second quarter, with the elimination of the impact of the COVID-19 pandemic and the company's operations resumed, the company achieved revenue of 541 million yuan in the second quarter, +21.85% year on year, and achieved net profit of 25.96 million yuan to the mother, +58.49% year on year.
To ensure food security, the country will step up efforts to build farmland infrastructure.
Under the national food security strategy, we believe that the construction of high-standard farmland and efficient water-saving irrigated farmland is expected to accelerate. According to the country's strategy of “hiding food in the land, hiding food in technology”, we believe that transforming farmland through modern agricultural technology to improve farmland production efficiency is an important part of the country's food security strategy. At the end of 2017, the country completed the construction of 560 million mu of high-standard farmland, adding an average of 80 million mu in 2018-2020. It is estimated that 800 million mu of high-standard farmland will be built in 2020; according to the national plan, it will reach 1 billion mu per year in 2022. Therefore, it is estimated that 2021-2022 will increase an average of 100 million mu per year, an increase of 25% over 80 million mu. The average investment per mu of high-standard farmland is about 1,500 yuan, and the annual market size for this alone is as high as 150 billion yuan.
As the absolute leader in the efficient water-saving irrigation engineering business, the company's orders grew at an accelerated pace, and its performance is expected to continue to grow strongly in the third quarter.
The company's business has expanded from water-saving irrigation to smart water, sewage treatment, safe water supply, aquatic ecological restoration, etc., and is a system solution integration solution integrating regional ecological planning, design, project construction, product supply, and intelligent project operation services. The company's industrial chain has significant advantages, and in recent years, the national market layout has been initially completed through cooperation with local water companies and water investment companies. In the context of the country's increased investment in agriculture and rural areas, the company's orders have continued to grow rapidly. Up to now, the company added 2.3 billion yuan in orders in 2020, exceeding 200 million yuan for the whole of last year. It is expected that with the high growth in orders, the company's performance is expected to accelerate further in the third quarter.
Give a “buy” rating:
It is estimated that in 2020-2022, the company will achieve operating income of 2,784/37.17/4,827 million, a year-on-year growth rate of 28.56%/33.48%/29.87%, net profit of 2.03/305/48%, and a year-on-year growth rate of 56.96%/49.91%/47.14%, corresponding to PE only 23 times, 15 times and 10 times, continuing to give a “buy” rating.
Risk warning: changes in national policies; company orders fall short of expectations; foreign competitors enter