Based on the water quality monitoring system, it has developed into a leading enterprise in integrated environmental monitoring services. The company is the leading enterprise of water quality monitoring equipment in China, and its main products include water quality monitoring system, atmospheric monitoring system, monitoring system operation service and environmental monitoring information management system. Based on the water quality monitoring system, the company has formed a complete surface water on-line monitoring system solution, breaking the technical monopoly and market monopoly of foreign equipment in the field of surface water online monitoring. In terms of atmospheric monitoring system, the company has a small share at present, and is expected to rise rapidly in the future driven by products such as atmospheric component stations. The 13th five-year Plan
During this period, benefiting from the continuous increase of national sewage treatment, the company's performance has grown rapidly. From 2015 to 2019, the company's revenue increased from 216 million yuan to 734 million yuan, with a compound annual growth rate of 35.77%. Net profit increased from 40 million yuan to 230 million yuan, with a compound annual growth rate of 54.85%.
The "14th five-year Plan" water quality monitoring efforts continue to increase, the company's market share is expected to continue to increase. During the 13th five-year Plan, the country began to increase the introduction of water pollution prevention and control policies. The increase of policies such as "river head system" and "water ten articles" has also driven the rapid growth of the demand for water quality monitoring equipment. According to the outline of the Ecological Environment Monitoring Plan (2020-2035) issued in June 2020, water quality monitoring will be more stringent during the 14th five-year Plan period, and the number of state-controlled sections for surface water monitoring will increase from 2050 to about 4000. Monitoring indicators will also be further increased on the basis of 9 indicators during the 13th five-year Plan period. We believe that driven by the national policy, the market demand for water quality monitoring equipment will continue to grow steadily during the 14th five-year Plan period. According to our estimates, we believe that during the 14th five-year Plan period, the average annual market demand for water quality monitoring equipment is about 4.32 billion yuan, and the total annual market demand for water quality monitoring, operation, maintenance and maintenance is about 4.37 billion yuan. As a leading enterprise of water quality monitoring equipment in China, the company has a market share of less than 15% in the field of domestic water quality monitoring equipment, and the market share is expected to continue to increase in the future, and water quality monitoring equipment will have double space during the 14th five-year Plan period.
The demand for atmospheric component stations is gradually increasing, and atmospheric monitoring equipment is expected to become a new growth pole for performance. According to the outline of the Ecological Environment Monitoring Plan (2020-2035), the number of national control points for atmospheric monitoring has increased from 1436 to about 2000 during the 14th five-year Plan period, indicating that the state will continue to increase the prevention and control of air pollution. According to our estimation, during the 14th five-year Plan period, the average annual market scale of atmospheric monitoring equipment in China is about 4.51 billion yuan. In addition, at present, the demand for domestic atmospheric component stations is gradually increasing. According to our estimates, the market scale of atmospheric component stations is expected to reach 1.95 billion yuan during the 14th five-year Plan period. At present, the main production enterprises of domestic component stations include Lihe Technology, Xianhe Environmental Protection and focusing Technology, etc., and the component monitoring market is still in its infancy. Lihe Science and Technology Sub-Station has been applied in Changsha, Zhuzhou and other cities and achieved good results. In addition, the company's gridded products, VOCs and other new products have good market applications, and the market share of gas detection equipment is expected to further increase.
Earnings forecast and investment rating: we predict that the diluted EPS of the company from 2020 to 2022 will be 1.74,2.04 and 2.66 yuan respectively, corresponding to the price-to-earnings ratio of 23-19-15 at the closing price of 38.85 yuan per share on September 8, 2020, which is lower than the industry average. Cover for the first time, giving the company a "buy" rating.
Stock price catalyst: the water quality monitoring policy is further strengthened in the 14th five-year Plan; the permeability of atmospheric component stations continues to increase.
Risk factors: the prevention and control of sewage during the 14th five-year Plan is not as strong as expected; market competition aggravates the risk.
