Company profile: more than 20 years of deep ploughing industry, "@ city" to explore global comprehensive management

The company was founded in 2001, deep ploughing industry for more than 20 years, business based in Guangzhou, radiation nationwide, the scope of service covers 26 provinces, nearly 100 cities. The company's strategy continues to upgrade iteratively, from "comprehensive improvement of human settlements" to "urban butler" and then to sub-strategy "@ city". The company continues to deepen its strategic connotation and explore comprehensive urban governance. In 2022, the company's sanitation business achieved revenue of 3.94 billion yuan, + 18.61% compared with the same period last year.

Industry trend: policy benefits continue to release, market capacity is expected to increase

In terms of policy, the central policy guides the expansion of the industry, and the local "city creation and defense" continues to make efforts. In recent years, the overall development characteristics of the relevant policies of the sanitation industry are as follows: the expansion of the business scope of sanitation services, the refinement of sanitation requirements, policies to encourage social capital investment, intelligent sanitation opportunities and so on. The company's forward-looking layout of the "city butler" strategy, in line with the current policy guidance, in the new sanitation service demand still has a strong competitive advantage.

In terms of the market, the degree of marketization of the industry is deepened. on the demand side, with the development of economy, people's requirements for the quality of life continue to improve, driving the high-quality development of the sanitation industry. In recent years, the government is more inclined to invite tenders for projects through integrated packaging, and the market-oriented capacity of the sanitation industry is still expected to be further improved in the future.

Competitive advantage: strategic forward-looking guidance, continuous leading orders, smart platform empowerment

Development strategy: the company develops around the core strategy of "city butler" to improve the efficiency of urban management and reduce the cost of public services. In recent years, the "city butler" strategy has continued to boost the company's order growth, promoted a number of non-traditional businesses to blossom, and achieved remarkable results. At the same time, the company deepens its strategy, and the "@ city" sub-strategy put forward in 2022 realizes both global governance and smart city construction.

Business development: from 2020 to 2022, the company's environmental sanitation bid-winning amount ranks first in the industry, order expansion continues to make efforts, and the bid-winning amount leads the industry. From a sub-regional point of view, the company's business outside the province continues to increase, and the business layout radiates the whole country. We believe that the company's leading order growth is mainly due to the leading role of the "city butler" strategic layout, the company's brand and scale, the company's regional layout and talent management and other advantages.

Operating efficiency: the car-to-passenger ratio of the company has been increasing in the past three years, and the degree of mechanization has increased by more than 3 times. At the same time, the company pays attention to intelligent system development. With intelligent sanitation service and smart city management as the core, the company has developed a "@ city" management cloud platform, which digitally drives innovation and development, and promotes fine and efficient management and operation.

Profit Forecast and Company valuation

We expect the company to achieve operating income of 44.87,50.18 and 5.656 billion yuan from 2023 to 2025, an increase of 13.45%, 11.84% and 12.72% respectively over the same period last year, and a net profit of 3.71,4.13 and 469 million yuan, up 18.06%, 11.24% and 13.41% respectively over the same period last year. Considering the company's leading position in strategic layout and resource endowment, we give the company a valuation of 15 times PE (FY2023), corresponding to a target market capitalization of 5.57 billion yuan and a target price of 13.63 yuan. Coverage for the first time, giving a "overweight" rating.

Risk tips: the risk of increasing the risk of issuance failure; the risk that the number of new orders is less than expected; the risk of bad debts due to poor repayment of accounts receivable; the risk of adjusting preferential policies for taxes and fees in the industry; the risk of intensified competition in the industry; the risk of downward profit margins for incremental projects; the risk of rising labor costs; and the risk that the project contract cannot be continued after the expiration of the project contract.