Event: the company issued a notice to disclose the plan to issue A-shares to specific targets, the number of shares to be issued does not exceed 30% of the total share capital before this issue, that is, 214 million shares (including capital), and the price of the shares is 5.65 yuan per share. The target of this issue to a specific object is Wang Hongchun, which is one of the actual controllers of the company. The total amount of funds raised from a specific target issue will not exceed 600 million yuan, which will be used to supplement liquidity and repay bank loans after deducting the issuance expenses.
Expand the scale of business, replenish working capital and enhance competitiveness. The national policy continues to support the environmental protection industry, the industry has entered an orderly development stage, the solid waste disposal industry has huge growth space, the company is facing better development opportunities and market opportunities. By the end of the third quarter of 2020, the company has invested 12 projects under construction in the form of PPP, BOT, EPC and so on. The reserve projects continue to expand and need more working capital support. The additional issuance will further enhance the company's capital strength, assist project construction, expand the company's business scale, supplement the working capital of the business development institute, and enhance the company's overall competitiveness.
Increase the holding proportion of the actual controller and optimize the capital structure. Before this issue, the Wang brothers held 216.7 million shares of the issuer through Peng Harrier investment, Wang Hongchun's spouse Chen Yiping held 4.14 million shares of the issuer, and the Wang brothers and their concerted actors held a total of 220.84 million shares, accounting for 30.89% of the total share capital of the company. This issue to a specific target will further enhance the shareholding ratio of the Wang brothers, enhance the stability of corporate control, and contribute to the long-term sustained and stable development of the company. In addition, at the end of September 2017-2020, the book value of accounts receivable of the company was 236.83 million yuan, 719.05 million yuan, 837.82 million yuan and 801.69 million yuan respectively. The book value of accounts receivable continued to grow, and the occupation of the company's working capital continued to increase. This increase is conducive to reducing financial risks, optimizing the capital structure and providing stable financial guarantee for the company.
The performance growth is good, and the solid waste business is ready to start. In 2019, the company achieved revenue of 1.93 billion yuan (+ 150.5%) and net profit of 290 million yuan (+ 72.3%). The substantial growth of project contracting business led to the rapid growth of the company. The company's operating income in the first three quarters of 2020 was 1.33 billion yuan, an increase of 26.5% over the same period last year. The net profit belonging to the parent company was 280 million yuan, an increase of 44.3% over the same period last year. In recent years, the performance showed rapid growth, organic solid waste treatment opened a new growth point, and the company actively participated in organic solid waste disposal business in the same period, laying out food, kitchen and wet waste harmless treatment. New business drives new growth. The water operation business is sound and profitable, and the follow-up newly signed and reconstruction and expansion projects will continue to increase the water operation capacity, and the increase in water prices will also increase the company's profits.
Profit forecast and investment advice. It is estimated that the EPS from 2020 to 2022 will be 0.59,0.76,0.97 yuan respectively, corresponding to 12x/10x and 7x PE, maintaining the "buy" rating.
Risk hint: water price increase is less than expected risk, policy risk, project progress is lower than expected risk and so on.
