20Q3's homing net profit was-43% year-on-year, and the profit forecast was downgraded. In the first three quarters of 2020, the company realized revenue / homing net profit / deducted non-homing net profit of 23.5 billion yuan, compared with 41% of the same period last year. 20Q3 realized revenue / homing net profit / deducted non-homing net profit of 8.7 percent, 0.59 million yuan, and-5 percent, 43 percent, 58 percent year-on-year. The epidemic affects the construction progress of engineering projects, which we think will be a drag on 20-year revenue recognition; the company's operating business is on the rise, but it is not large enough to hedge against the decline in engineering revenue. Downgrade the profit forecast for 20-22 EPS 0.57 Universe 0.81 Plus 0.97 yuan, giving 21 years 18x target PE, the target price 14.6 yuan per share, maintaining the "overweight" rating.
Revenue continues to decline, and the recovery progress of the project needs to be resumed.
Affected by COVID-19 's epidemic situation, the resumption time of the company and upstream and downstream enterprises has generally been delayed, and the progress of project construction has slowed down. The decline in revenue of 20Q3 continues to expand, and the progress of the project has yet to be resumed by 20Q4.
The company's operating business is on the rise, with revenue up 122% in the first half of the year compared with the same period last year, but the volume is small (only 100 million yuan in the first half), which is not enough to hedge against the decline of the project. With the adjustment of the company's business structure, the proportion of operating income is expected to increase year by year.
With the deepening of cooperation with Guangzhou Huantou, it is expected to expand new markets and orders in the future. 20Q3 Guangzhou Huantou and Guangxi Huantou have successively become the top 10 shareholders of the company, with shareholdings of 3.14% and 1.35% respectively. Guangzhou Huantou is a state-owned enterprise directly under the Guangzhou Municipal Government, with the whole industry chain of municipal solid waste collection, transit, transportation and terminal treatment. Mr. Liu Xianrong, chairman of Guangzhou Huantou, is the new director of the company, and Mr. Zhang Minghao, assistant to the general manager, is the new vice president of the company. We believe that the company is expected to further open up the soil remediation and water treatment market with the help of the two provincial Huanchou Group platforms.
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, 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.
Downgrade profit forecast, target price 14.6 yuan, "increase" rating project progress to be resumed, downgrade profit forecast. It is estimated that the net profit of homing in 20-22 years is 2.3 / 390 million yuan (the previous value is 5.10 million yuan), the corresponding EPS is 0.57 shock 0.81 pound 0.97 yuan, and the corresponding PE is 19 shock 14max 11x. Comparable company's 21-year Wind unanimously expected the average PE to be 14x. Considering that the company has abundant orders on hand and the provincial ring casting platform brings incremental orders, the 21-year return net profit of the company is expected to rebound, we give the company a 21-year 18x target PE, with a target price of 14.6 yuan per share (the previous value is 15 yuan).
Maintain the "overweight" rating.
Risk hint: the progress of the project is not as expected, and the number of new winning projects is not as expected.
