Incidents:
The company released its 2020 semi-annual report on the evening of August 26. It achieved operating income of 2,551 billion yuan in the first half of the year, a decrease of 22.80% over the previous year; Guimu's net profit was 1.07 million yuan, a decrease of 94.70% over the previous year.
Comment:
Q2 performance rebounded, and operations in the second half of the year may improve month-on-month. Affected by the epidemic, the garden construction business could not be carried out normally. The company achieved operating income of 299 million yuan and net profit - 176 million yuan in the first quarter. With the accelerated resumption of work and production in the second quarter, the company's operations continued to improve. In the second quarter, it achieved revenue of 2,251 million yuan in a single quarter, an increase of 1.60% over the previous year; net profit was 187 million yuan, an increase of 1.39% over the previous year.
The company turned a loss into a profit in the second quarter. As the peak of construction rush in the second half of the year approaches, the company's operations are expected to improve month-on-month.
As investment in ecological and environmental protection construction increases, the company's main business is expected to continue to benefit. Among the main business, the water administration and environmental treatment business grew rapidly, with revenue of 1,445 billion yuan, accounting for 56.67% of revenue, an increase of 16.87 percentage points over the previous year. The profitability of the cultural tourism business increased. The gross profit margin for the first half of this year was 43.88%, an increase of 1.26 percentage points over the previous year. In the first half of the year, the company successively won bids for a number of high-quality garden and water projects. Adequate order reserves supported the steady development of the company's future performance. At the same time, it is also expected to improve the company's cash flow situation. In recent years, environmental protection policies have been tightened, standards such as water quality treatment have been raised, and a large number of high-quality orders have been placed in the industry. The company has seized market opportunities such as smart water, urban and rural water supply, sewage treatment, etc., and the main garden and water business is expected to expand steadily.
The spin-off and listing of Hengrun Technology is progressing steadily, which is expected to contribute new profit growth points. Hengrun Technology announced a capital increase and stock expansion plan on May 5, which will be listed on the GEM. Microcommunication, a participating company, has also entered a mentoring period for the selection layer of the New Third Board. The company's capital operation will broaden the development space and create new profit growth points. The company actively uses 5G commercialization+AR/VR technology to build a leading cultural technology equipment enterprise, which will increase the profitability level of the overall business.
Affected by the epidemic, the company's profit forecast was lowered to maintain the company's “buy” rating. The company's 2020/2021/2022 EPS is expected to be 0.17 yuan/0.26 yuan/0.37 yuan respectively.
Risk warning: The epidemic has increased the risk, and the progress of the spin-off listing has fallen short of expectations.