The epidemic dragged down 1Q20's performance and lowered its annual profit forecast.
According to the company's annual report, the company achieved operating income / return net profit of 1.71 billion yuan in 19 years, compared with the same period last year. The return net profit level was lower than the company's performance of 130 million yuan on February 28, slightly lower than expected. The company also announced that the net profit of 1Q20 was 20 million yuan,-37.7% year-on-year. The decline in performance was mainly affected by the epidemic situation of COVID-19, and the construction of the project could not be carried out normally. Taking into account the impact of the epidemic, we lowered the profit forecast for 2020 to 220 million yuan (the previous value is 260 million yuan), maintained the 21-year net profit forecast of 320 million yuan, and introduced the 22-year forecast of 430 million yuan. With reference to the comparable company wind's consistent forecast of the average Pmax E 12x in 2020, we give the company a "buy" rating corresponding to the target price of 11.30-13.35 yuan per share (previous value 13.25-15.66).
The 19-year performance was slightly lower than expected, and the operating cash flow was steady.
In 19 years, the company achieved a net profit of 120 million yuan,-53.3% compared with the same period last year, mainly due to the following factors:
1) the revenue of water treatment agents and derivatives fell 6.8% to 740 million yuan in 1919 compared with the same period last year, while the gross profit margin narrowed to 28.6% year on year, mainly due to the decline in the price of chloromethane, a water treatment agent derivative, in 1919. 2) the company recorded a loss of 66 million yuan in assets and credit impairment due to accounts receivable and goodwill. 3) due to management changes, the company's main wholly-owned subsidiaries failed to fulfill their performance commitments in the past 19 years, and the net profit decreased by 43% to 47 million yuan compared with the same period last year. Although the changes in the management of the company's wholly-owned subsidiaries have a negative impact on 19's performance, it is an one-time factor. We expect the follow-up impact to be controllable. Although the company's performance declined in 2019, it achieved operating cash flow of 110 million yuan, which was + 32.3% compared with the same period last year.
The epidemic affected the progress of engineering business, and the performance of 1Q20 declined.
1Q20's revenue / return net profit was 270 million yuan, compared with-28.3% and 37.7% last year, which was in the middle of the forecast range for the first quarter on April 8. The decline in 1Q20 performance is mainly due to the impact of the epidemic, the company's engineering project construction can not be carried out normally (construction revenue accounted for 46% in 2019), which has a great impact on the performance. At the same time, the company announced on February 10, 2020 that after the outbreak, the wholly-owned subsidiary Qingyuan Water treatment and Ande Technology were arranged to urgently adjust the product types, increasing the production of 84 disinfectants, peracetic acid disinfectants and other products. According to our research, the current production capacity of 84 disinfectants is about 80-100 tons per day. At the same time, the company expects to have a trial production of 180000 tons of water treatment agent expansion project in mid-2020. we judge that the expansion of production line should boost production and boost performance.
Target price 11.30-13.35 yuan, maintain the "buy" rating
Although the company's performance in 2019 was dragged down by one-time factors compared with the same period last year, and the 1Q20 engineering business was greatly affected by the epidemic, the company plans to expand its main water treatment agent production capacity of 180000 tons, and it is expected that trial production in mid-2020 should boost production and boost performance. At the same time, the expansion of wholly-owned subsidiary Ander Technology and Qingyuan water treatment disinfectant products may bring corresponding performance increments to the company in the post-epidemic era. We appropriately lowered the profit forecast EPS for 2020 to 1.03 yuan (the previous value is 1.21 yuan), maintained the 21-year EPS forecast of 1.46 yuan, and introduced the 22-year forecast of 1.97 yuan. With reference to the comparable company wind's consistent forecast of the average Pmax E 12x in 2020, we give the company a "buy" rating corresponding to the target price of 11.30-13.35 yuan per share (previous value 13.25-15.66).
Risk hint: the trial production progress of water treatment agent is lower than expected, and the performance of syngenetic environment is lower than expected.