The main business of landscape engineering has developed steadily, and the economic recovery after the epidemic is expected to boost the company's performance.
The industry of Huilu ecology is the municipal garden industry, and its development is closely related to the macro-economy and the process of urbanization in China. From 2017 to 2021, the investment in urban landscaping in China exceeded 200 billion yuan. Although it decreased slightly during the epidemic period, it remained at a high level as a whole. The company's main business is landscape engineering construction, landscape design and seedling planting, etc., which can provide complete services from seedling planting, landscape engineering design, construction and follow-up greening and maintenance. The company's garden business is mainly carried out through Huilu Garden, which contributes more than 90% to the revenue of listed companies.
After Huilu Ecology re-listed in 2021, its operating income reached 775 million yuan that year, down 4.84% from the same period last year. The company's operating income in the first three quarters of 2022 was 364 million yuan, down 24.01% from the same period last year. The decline in revenue is mainly due to the impact of the epidemic, resulting in varying degrees of shutdown of downstream construction projects; and with the deregulation of epidemic control and the recovery of economic "steady growth", the company's performance is expected to hit bottom and pick up.
In the first three quarters of 2022, the company's gross profit margin was 110 million yuan and gross profit margin was 30.63%, higher than the industry average of 19.48%. We believe that its integrated operation advantage can improve its project gross profit margin to a certain extent, and the company's large number of projects and efficient project process operation will also improve the company's gross profit level.
Promote equity incentive to demonstrate the confidence of the company
The company announced the equity incentive plan for 2023 on January 20, and the number of incentive targets granted by the equity incentive plan for the first time does not exceed 66, including directors, senior managers, core cadres and other personnel that the board of directors deems necessary to encourage. According to the company's equity incentive scheme, if the company achieves the performance evaluation target in the next three years, the company's net profit will grow at a compound rate of 11.89% from 2023 to 2025.
We believe that with the completion of the company's restricted stock award, the performance evaluation target of the lifting period of the incentive scheme will continue to drive the enthusiasm and initiative of the company's management, improve the overall management level of the company, and promote the growth of the company's performance.
The customer has good credit qualification and should recover the money steadily.
According to the disclosure of the company, the company's customer resources and qualifications are good, the top five customers are large central enterprises and state-owned enterprises, financial and credit conditions are good, and all of them have written off bad debts. On September 30, 2022, the company's accounts receivable was 490 million yuan, an increase of 16.88% over the same period last year, and long-term receivables were 40 million yuan, down 86.15% from the same period last year. In the first three quarters of 2022, the company realized 428 million yuan in receivables and bills receivable, and 276 million yuan in long-term receivables. In 2022, the company focuses on improving the capital turnover rate, strengthening the project settlement and payback efforts, superimposing downstream high-quality customer resources reserves, the company's overall business foundation is solid.
Layout of high-prosperity quartz sand track, future growth space can be expected according to the company announcement, in September 2022, the company bought a 30% stake in Zhongke Bosheng for 15 million yuan. Zhongke Bosheng is a private company that produces high-purity quartz sand materials. Other shareholders of the company have legal exploration rights in many high-quality quartz mines on the African continent. Relying on the scientific research and technology of the Institute of process Engineering of the Chinese Academy of Sciences, the company has cooperated for a long time to carry out the research on the purification technology of high purity quartz materials.
Using raw quartz ore as raw material, the project has successively completed the small-scale test of high-purity quartz sand and the stable operation of the expansion device through the industrial technology development of high-purity quartz sand. Through a series of technical means, high purity quartz sand with a purity of more than 4.5N is produced.
At present, its production equipment is under installation and commissioning, and is expected to be put into production in February 2023. The first phase of production capacity is planned to produce 5000 tons of high-purity quartz sand and photovoltaic crucible high-purity quartz sand.
At present, the prosperity of photovoltaic industry in China is high, and high purity quartz sand is mainly related to the manufacture of quartz crucibles. In terms of photovoltaic installed capacity, China's new photovoltaic installed capacity in 2022 was 87.41GW, an increase of 60.3% compared with the same period last year. 2016-2022 China's photovoltaic installed capacity CAGR reached 26.11%. According to the forecast of China Photovoltaic Industry Association, China Photovoltaic Association will further grow rapidly, and the average annual installed capacity in China will reach 83-99GW from 2023 to 2025. With the rapid development of the industry scale, the demand for arc quartz crucibles for single crystals will increase synchronously, driving the demand for high-purity quartz sand. At the same time, the conversion from P-type battery to N-electrode battery will also increase the demand for quartz crucible and further increase the demand for high-purity quartz sand.
We believe that the prosperity of the high-purity quartz sand industry will continue to rise, and taking into account the continuous improvement of its downstream demand and the high barrier of the high-purity quartz sand industry, the price of quartz sand is expected to continue to rise. With the promotion of the mass production process of Zhongke Bosheng high-purity quartz sand products, it is expected to create the second growth curve for the company. The company takes the initiative to lay out the high-purity quartz sand track and actively look for new profit growth points for the company. In the context of the expansion of the photovoltaic industry, Zhongke Bosheng's high-purity quartz sand business is expected to usher in the rapid growth of demand, and the company is growing well. At the same time, the horizontal layout of the company can also hedge the risk of the singleness of the main business to a certain extent, making the company more sound.
Profit forecast
It is predicted that the income of the company from 2022 to 2024 is 6.34,8.08,881 million yuan respectively, the net profit is 1.11,1.36 and 158 million yuan respectively, the EPS is 0.56,0.69,0.80 yuan respectively, and the current stock price corresponding to PE is 13.6,11.2,9.6 times respectively.
Risk hint
(1) the macroeconomic downward pressure increases; (2) the progress of the company's repayment is not as expected; (3) the company's foreign investment risk increases; (4) the demand for downstream high-purity quartz sand is lower than expected.
