2Q20 home net profit-13%, downgrade profit forecast and rating
1H20 realized revenue / return net profit / deduction of non-home net profit of 1.48 billion yuan, compared with the same period last year, which was-3%, 14%, 29%, 2Q20, 0.5 million and 37%, respectively. The epidemic affects the construction progress of engineering projects, which we believe will drag down revenue recognition for 20 years. 1H20 operating business revenue is + 122% compared with the same period last year, but the volume is not enough to hedge against the decline in engineering revenue. Downgrade profit forecast, expected 20-22 EPS 0.72 Universe 1.07 to 1.26 yuan, give 21 years 14x target PE, target price 15 yuan per share, downgraded to "overweight" rating.
The epidemic affected the construction progress of the project, and the operating income increased significantly.
1H20's revenue and return net profit declined, mainly due to the impact of COVID-19 's epidemic, the company and upstream and downstream enterprises generally delayed the resumption of work, the progress of project construction has slowed down, with the company's resumption of work and production accelerated, 2H20 is expected to recover significantly. The operating income of 1H20 Company is RMB100 million / yoy+122%;. In terms of the composition of operating income, 23% of water supply (2019 36%), 23% of sewage (2019VERV 21%), 49% of solid waste (2019PVR 31%), and 5% of sludge treatment and soil disposal terminals (2019VERV 11%).
There are plenty of orders on hand, and the livelihood of the project strongly ensures the return of cash.
By the end of June 20, the company had orders of 9.95 billion yuan (at the end of 19: 10.37 billion yuan), including 5.62 billion yuan for PPP projects, 2.75 billion yuan for EP/EPC orders and 1.34 billion yuan for operational orders. EP/EPC order business accounts for 67% of water treatment, 19% of soil remediation and 14% of chemical cleaning production. Most of the company's orders are projects with strong livelihood attributes, the ability to pay is guaranteed and the payback cycle is short, which is conducive to the follow-up cash return.
Actively expand the disposal of hazardous wastes by relying on the advantages of independent technology and equipment
In August 20, the company publicly issued a net additional fund of 580 million yuan (planned to raise 710 million yuan). The company plans to spend 290 million yuan on the Beibu Gulf resources recycling project (invested by the subsidiary Keqing Environment). It has invested 240 million yuan in advance with its own funds from May 19 to July 20 (July 20 verification report).
The project serves the dangerous waste of industrial enterprises around Beihai City and Beibu Gulf, with a design capacity of 64,000 tons / year, including incineration treatment of 16500 tons / year, solidified landfill of 30,000 tons / year, physicochemical treatment of 10,000 tons / year and comprehensive utilization of etching liquid of 0.75 million tons / year. After the completion of the project, 32 kinds of hazardous waste can be received to improve the business layout of the company.
Downgrade profit forecast, target price 15 yuan, "increase" rating
As the epidemic drags down the progress of the project construction, we think that it will affect the company's 20-year revenue recognition and lower its profit forecast. The estimated net return profit for 20-22 years is 2.9pm 4301,510,000,000 yuan (the previous value is 37,000,000 EPS 1.26yuan, corresponding to PE 18x/12x/10x). With reference to the company's 21-year Wind consensus expectation, the average PE is 17x. Considering the relatively high proportion of the company's engineering business and the impact of COVID-19 's epidemic situation, we give the company a 21-year 14x target PE of 15 yuan per share (the previous value is 13.44-15.51 yuan). Downgrade to "overweight" rating.
Risk hint: the progress of the project is not as expected, and the number of new winning projects is not as expected.
