Event: the company issued a plan to issue no more than 122 million shares (7.68 yuan per share) to Guangzhou Huantou Investment Group (hereinafter referred to as Guanghuan Investment Group) and raise no more than 935 million yuan. Guanghuan Investment promised not to transfer the new shares of this issue within 36 months from the end of the issue.
The epidemic affects the progress of the project, and the reserve of on-hand orders is good. The construction and implementation progress of some projects of the company affected by the epidemic slowed down in 2020, and in order to improve the overall quality of PPP business, the company gradually withdrew some PPP projects that were unclear or could not be implemented or put into operation for a long time. Under this background, the company achieved operating income of 2.346 billion yuan in the first three quarters of 2020,-3.38% of the same period last year, and net profit of 181 million yuan and-25.83% of the same period last year. On the other hand, the company has maintained a good market development force. the newly signed order in 2020 is expected to exceed 2 billion yuan, and the contract reserve is nearly 5 billion yuan. Since the beginning of 21 years, it has successively won the bid for the comprehensive renovation of Liutiangou in Baise City (Phase II), the reconstruction project of sewage pipe network in Ningming County, the PPP project of comprehensive improvement of rural domestic water supply and drainage and water environment in Wuming District, Nanning City, and other projects, with good performance in order-on-hand reserve and market development.
We have made breakthroughs in many aspects, such as increased support, capital support, project cooperation and so on. Guangzhou Huantou is a state-owned enterprise directly under the people's Government of Guangzhou, with total assets of more than 20 billion yuan. Its business covers clean energy production, solid waste resources development, environmental protection equipment manufacturing and modern environmental protection services. After Guanghuan Investment invested 504 million yuan to transfer 40 million shares to become Bosch's largest shareholder, it plans to contribute another 935 million yuan to support Bosch's further development at the financial level. In addition, Guanghuan Investment and Bosch recently jointly won the bid for the PPP project for the comprehensive improvement of rural domestic water supply and drainage and water environment in Wuming District, Nanning City. Guanghuan Investment is mainly responsible for leading the establishment of project companies and related financing work, giving full play to the platform and capital advantages of state-owned enterprises. Bosch is responsible for the procurement, construction, installation and commissioning of all projects and the specific operation and management of follow-up projects, as well as giving full play to Bosch's technical and competitive advantages in design, environmental assessment, equipment manufacturing and project implementation. In the future, Guanghuan Investment and Bosch are expected to increase their collaborative work in environmental protection business (including hazardous waste, soil remediation, sanitation and other subdivisions) to help Bosch achieve steady growth.
Maintain the "buy" rating: according to the company's existing orders and the factors affected by the epidemic, we downgrade our profit forecast. It is estimated that the company's net return profit for 2020-22 will be 248,319,374 million yuan (down 28%, 19% and 15% respectively), the corresponding EPS for 20-22 is 0.61 PE 0.790.92, and the current share price is 13 times for 21-year PE. We believe that the company has good environmental protection expertise and project experience, and by actively optimizing the order structure by increasing the number of light asset EPC orders, the focus of future development is gradually transitioning to industrial environmental protection, which requires higher technical strength; Guanghuan investment will give the company capital, platform, project expansion and other aspects of support, we are optimistic that the company's performance will return to a steady growth trend and maintain the "buy" rating.
Risk hint: the progress of the project is lower than expected; the progress of additional issuance is lower than expected; the slow return of the project leads to the deterioration of operating cash flow.
