Report Summary:
“Algal eaters” are the entry point to build a symbiotic aquatic ecosystem with Cordyceps to help water treatment implement a new concept of environmental protection. The company has invented a bio-ecological model for ecological restoration of eutrophic water bodies. The core of its technical route is “an eutrophic aquatic ecological restoration method guided by algae eating bugs”. The method uses “algal eaters” as the pioneer species to engulf algae, rot, and bacteria in the water body to improve the transparency of the water body. Second, a stable underwater forest system centered on a submerged plant system is constructed by planting submerged plants, putting in, and configuring photosynthetic bacteria and other aquatic animals. Finally, through the adjustment and improvement of various aquatic organisms, a stable insect-grass symbiotic aquatic ecosystem is formed, and the eutrophic substances in the water body are converted into plant and animal proteins, which has the effect of drastically reducing the nutrients in the water body, thereby achieving the goal of improving the nutrient-rich water body into an active, healthy water body with natural purification ability.
The unique approach to water ecology management brings high quality and sustainable performance to the company. As China's investment in environmental protection management increases, new requirements have also been put forward for the sustainability of environmental protection management methods. The company's unique aquatic ecological management model has helped the company's performance rise steadily. In the first half of 2020, against the backdrop of the entire industry sector being generally affected by the epidemic and declining performance, the company achieved revenue of 218.905 million yuan, an increase of 12.08% over the previous year. At the same time, through comparative analysis with peers, the company's revenue and profit growth rate in recent years was higher than the industry average. Gross sales margin and net sales interest rate are also in a leading position in the industry, and asset turnover is good. We believe that the company is currently a scarce target with excellent quality and continuous improvement in profitability in the environmental protection sector.
Investment suggestions: Based on the company's unique market position and good performance growth expectations for the company, we expect the company's operating income in 2020-2022 to be 671/887/1,191 million yuan, net profit of 171/2.3/319 million yuan, and EPS of 2.9/2.95/4.08, corresponding to PE21.5X, 15.96X, and 11.54X. For the first time, it was covered and given a “buy” rating.
Risk warning: Environmental protection falls short of expectations, accounts receivable surges, market competition intensifies
