The epidemic affects the performance and improves the long-term development. The company issued a performance forecast in January and expects to achieve a net profit loss of 315-410 million yuan in 2020, down 226% from the same period last year. The main reasons are as follows: the cultural and tourism sector suffered a large loss due to the impact of the epidemic; the provision for goodwill and impairment of long-term equity investment totaled 4-480 million yuan. However, the company's cash flow is good, with a net operating cash flow of about 700 million yuan in 2020. It is expected that the company's cash flow and profitability will continue to improve in the future. With the epidemic under control, the cultural sector business will be gradually repaired, and the company's business will also usher in steady development.
We will increase investment in scientific research and innovation and build leading enterprises in cultural, scientific and technological equipment. The company increased its R & D investment, and the R & D expenditure in the first three quarters was 232 million yuan, an increase of 35% over the same period last year. As of June 2020, the company has 7 high-tech enterprises, 260 authorized patents, 30 high-tech products and 235 software copyrights. The company continues to strengthen its R & D and innovation investment in ecological landscape, water ecological treatment and restoration, soil restoration, wetland ecological restoration and other fields, actively cooperates with scientific research institutes and universities, and proposes to use 5G commercialization + AR\ VR technology to build a leading enterprise in cultural and scientific equipment.
Win the bid for major projects, thicken the company's performance. According to the February announcement, the consortium formed by the company and Tongji University Architectural Design and Research Institute (Group) Co., Ltd. won the bid for the general contract for the design, procurement and construction of the comprehensive management project, with an estimated investment of 800 million yuan. accounting for 10.05% of the company's business income in 2019, it is an important achievement for the company to vigorously expand its eco-environmental business in the Yangtze River Delta. If the project can be implemented smoothly, it will have a significant impact on the future performance of the company.
The goal of ecological construction in the 14th five-year Plan is established, which is beneficial to the garden ecological business of the company. According to the information released by the Forestry and Grass Bureau, the basic goal of China's ecological construction during the 14th five-year Plan period has been set: strive to achieve 24.1 percent of the country's forest coverage and 19 billion cubic meters of forest stock by 2025. The comprehensive vegetation coverage of grassland reaches 57%, and the wetland protection rate reaches 55% and 60%, and the desertified land can be controlled. Driven by policy objectives, the company's business of landscape engineering construction, landscape planning and design, greening maintenance and seedling production and marketing will usher in a period of growth during the 14th five-year Plan period.
Maintain the company's "buy" rating. The performance of the company is greatly affected by the epidemic, and more provision for impairment is made, which affects the profits of the company. Therefore, the profit forecast is lowered, and the company's EPS from 2020 to 2022 is expected to be-0.21, 0.20, 0.37, respectively.
Risk hint: the payback of the order is not as expected, and the performance forecast and valuation judgment are not as expected.
