Industry: rural revitalization strategy to promote, PPP model transformation, the company's orders and performance is expected to high growth!

The main results are as follows: 1) the change of industry policy is beneficial to the improvement of industrial concentration. The 19th CPC National Congress has promoted the revitalization of rural areas to the national strategy, and agriculture and rural areas will become the top priority of the country's future development and investment. Since 2016, there have been two major changes in the industry:

First, the state puts forward higher requirements for the construction, management and transportation of farmland water-saving projects, which requires not only high-standard quality engineering construction, but also subsequent effective operation, maintenance and management; second, the introduction of PPP model in the field of farmland water-saving construction, the large number of PPP orders and higher requirements for enterprise financing capacity. Industry changes are more conducive to the leading enterprises with large brand influence, sufficient construction experience, strong financing capacity and high level of operation and maintenance management, and the industry concentration will be accelerated. 2) the company has a high growth in order revenue. As the industry leader, the company's newly signed orders reached nearly 3 billion and 4.5 billion respectively from 2017 to 2018, a year-on-year growth rate of 88% and 52% respectively, and is expected to maintain rapid growth in the future. Even under the influence of the tightening of national financial policy and the adjustment of the Ministry of Agriculture and villages in 2019, the company still achieved 39% revenue growth. It is expected that with the improvement of the country's financial environment and the completion of the adjustment of the Ministry of Agriculture and villages, the landing rate of company orders will accelerate, and the company's performance is expected to accelerate in 2018-2021.

The company: the "Yuanmou model" is profitable, which opens a new chapter in the upgrading of the company's business model.

1) what is the "Yuanmou model"? Based on the farmland water-saving project, the company realizes the operation of irrigation and water conservancy facilities, and provides farmers with extended water and fertilizer integration, planting technology and other value-added services. 2) what is the significance of "Yuanmou mode"? Will realize the transformation and upgrading of the company's business model from engineering contractor to "farmland housekeeper". According to our estimation, under the "Yuanmou model", the company can obtain a stable basic water fee income of 630 yuan / mu, an operating cost of about 350 yuan / mu, and a basic operating profit of 280 yuan / mu. In terms of value-added services, fertilizer sales profit can be 300 yuan / mu, plus the basic profit brought by water charges, a total of about 600 yuan / mu If the future potential technical services, seedling collection, financial services, sales services and other value-added services are considered, the company's operating profits are expected to be further improved. 3) how is the Yuanmou project going? As of 2018, Yuanmou project has an operating area of 76000 mu, and is expected to achieve full operation of 90,000 mu in 2019. 4) Why is the company so profitable? The core is that the company's water and fertilizer integration service has created considerable economic value for farmers. according to estimates, taking the planting of small tomatoes in one season as an example, it can help farmers save 1010 yuan in water and fertilizer costs, and increase the unit yield from 4 tons / mu to 7 tons / mu.

Future process: it is expected that the "Yuanmou model" will be promoted rapidly, and the company's "farmland housekeeper" business is expected to grow high!

The promotion of the company's "Yuanmou model" depends on excellent agricultural resources. The total planting area of vegetables and orchards in China is about 467 million mu, and the market space is vast. As a forerunner, the company is expected to rely on the dominant position of its listed companies and the experience of Yuanmou model, fast horse racing enclosure, to find and occupy superior agricultural resource areas throughout the country, and to realize the rapid expansion of its "farmland housekeeper" business. At present, the company has Yunnan Xiangyun, Binchuan and Gansu Wushan three projects with a total area of 150000 mu is in the construction period. We estimate that the area of the company's cash crop "farmland housekeeper" from 2019 to 2021 is expected to reach 150000 mu, 300000 mu and 600000 mu.

Give a "buy" rating

Considering the operating increment brought to the company by the "Yuanmou model", we raised the company's revenue for 2019-2021 from 25.50, 33.18, and 4.272 billion to 26.25, 34.41, and 4.512 billion, with an increase of 48%, 31%, and net profit from 2.06, 304, and 451 million to 2.2, 3.3, and 4.90 million, respectively, with an increase of 119%, 50, and 48%. The corresponding EPS is 0.28 PE 0.41 plus 0.61 yuan respectively. Considering the broad development space and the rapid growth of the company's performance, it is given a 25-fold PE, corresponding to the performance target price of 10 yuan in 2020!

Risk tips: 1, national policy changes; 2, natural disasters; 3, the landing of the order is not as expected.