The net profit of 2Q20 is-53%, and its profit forecast and rating are lowered.
1H20 realized revenue / return net profit / deduction of non-return net profit RMB 5.3 million, compared with the same period last year. The revenue / return net profit / deduction of non-return net profit realized by 1H20 Company is RMB 0.18 / 14 million, compared with the same period last year. Affected by the epidemic situation, the expansion progress of water treatment agent in the company is slower than expected, and the construction business progress of the project lags behind. The 20-22 profit forecast is lowered to 0.56 EPS 0.78max 1.04 yuan, and the 21-year 17x target Pmax E is given, with a target price of 13.2 yuan per share. Short-term results came under pressure, downgraded to "overweight" rating.
Revenue from water treatment products fell 6% from the same period last year, and the progress of production expansion was slower than expected. 1H20's water treatment agent and derivatives business achieved revenue of 320 million yuan / yoy-6%, gross profit margin of 30.3%, unchanged from the same period last year. The company expects the annual capacity of 180000 tons of water treatment agent expansion project to be trial-produced in the second half of 20 years, which is behind the April guidelines (mid-20-year trial production). Through this expansion, the company hopes to consolidate the leading position of organic phosphine water treatment agents and expand the market of phosphorus-free water treatment agents. We expect production line expansion to boost production and optimize product mix, helping 21-year performance pick up.
The project construction design revenue decreased 61% compared with the same period last year, and the epidemic affected the construction progress. 1H20 Company realized revenue of 140 million yuan / yoy-61%, gross profit margin 24.5%/yoy-5.6 pct. Affected by the epidemic, the company's engineering projects are moving forward slowly, resulting in a large year-on-year decline in engineering revenue. 1H20 added 5 new EPC orders with a total amount of 25.34 million yuan, and the total EPC/BT orders at the end of the period totaled 110 million yuan.
Zhongxu Environment has a loss of 540000 yuan. We think it is difficult to achieve the annual performance commitment. 1H20 subsidiary Zhongxu Environmental Company achieves revenue of 120 million yuan, net profit of-540000 yuan, and 20-year commitment of net profit of not less than 115.2 million yuan. Zhongxu Environment takes the construction and construction of environmental protection projects as its core business, and is currently carrying out environmental protection businesses such as comprehensive environmental control and river treatment in Anhui and Henan, with a goodwill of 140 million yuan by the end of June 20. 2H20 Zhongxu Environment needs to achieve a net profit of 116 million yuan in order to achieve the performance commitment target, with reference to the operation of 2H18 and 2H19, we think it is difficult to achieve.
Downgrade profit forecast, target price 13.2 yuan, "overweight" rating, taking into account the impact of the epidemic on the sales of water treatment products and engineering construction, we lowered our profit forecast. It is estimated that the net return profit for 20-22 years will be 1.2 billion yuan (the previous value is 3.2 billion yuan), corresponding to EPS 0.56 0.78 billion yuan, PE is 22-16-12 times. According to the company's 21-year Wind consensus forecast, the average PE is 15 times. Taking into account the company's leading position in the water treatment agent industry and the 21-22 year return net profit growth forecast, we give the company a 21-year 17x target PE of 13.2 yuan per share (previous value 11.30-13.35 yuan). Short-term results came under pressure, downgraded to "overweight" rating.
Risk hint: the trial production progress of water treatment agent is lower than expected, and the performance of syngenetic environment is lower than expected.