Events:
On December 28, 2020, the Development and Review Commission of China Securities Regulatory Commission examined the application for non-public offering of A-shares in a clean environment. According to the results of the meeting, the company's application for non-public offering of A-shares was approved.
Comments:
The controlling shareholders subscribe for additional shares in cash to enhance their control and demonstrate their confidence in development. The target of this additional issue is the company's controlling shareholder, Chuanfa Environment. Chuanfa Environment will subscribe for the company's non-public offering shares in cash. The offering price is 4.90 yuan per share, the subscription amount of Chuanfa Environment is 1.58 billion yuan, and the limited selling period of the subscription shares is 36 months. After the completion of the increase, Chuanfa Environment's shareholding in listed companies will increase from 25.31% to 42.47%. The controlling shareholder's position in controlling the listed company has been consolidated, and it also shows the confidence of Chuanfa environment in the future development of the listed company. Chuanfa Environment is a key investment platform for ecological environment industry in Sichuan, and listed companies will also focus on developing market business in southwest China in the future.
After raising funds in place, it will greatly enhance the financial strength of the company and help expand the new business direction. After deducting the issuance expenses, the additional funds raised will be invested in the following projects: (1) the construction of intelligent environment cloud platform and demonstration project (150 million yuan); (2) the upgrading of research institutes and industrial technology centers (200 million yuan); and (3) replenishment of working capital and repayment of bank loans (1.23 billion yuan). The construction of intelligent environmental cloud platform and demonstration projects will help the company expand into the fields of environmental monitoring, pollution source analysis and management countermeasure system at the front of the industrial chain, and form a complete service system with the company's environmental governance business. The upgrading project of the Research Institute and Industrial Technology Center focuses on industrial flue gas treatment, industrial sewage treatment, comprehensive utilization of waste resources, comprehensive disposal of industrial solid waste and hazardous waste, soil remediation and other sub-areas of research and development. help the company to consolidate the core business of industrial smoke treatment, at the same time, expand to other key industries. At the same time, 1.23 billion of the funds will be used to replenish the flow and repay the loans, the company's financial strength will be greatly expanded, the financial structure will also be optimized, and the debt ratio and financial expense rate will be reduced. The expanded financial strength has laid a solid foundation for the company to expand into other sub-areas of environmental protection. The comprehensive management of industrial environment is the core business of the company at present, and energy saving and comprehensive utilization of resources are the business direction of the company. The company's traditional industrial smoke control business has gradually matured in the market, and the room for sustained growth is limited, while the environmental protection industry still has a trillion-level market accelerated release in other segments. Therefore, the company has expanded its business direction through a variety of means in recent years. In the long run, the company is committed to becoming a complete integrated environmental service provider in the business chain from front-end monitoring to back-end governance.
Profit forecast and rating: the company is expected to achieve an attributable net profit of 250 million yuan, 350 million yuan and 440 million yuan respectively from 2020 to 2022. The current stock price is 23 times the valuation of PE in 2020, maintaining a prudent recommended rating.
Risk hint: the progress of new business development is not as expected, the type of business increases, the scope expands, but the management boundary risk is limited, and the market systemic risk.