Please update
For the nine months ended September 30, 2019, the company recorded revenue of HK $3.859 billion (the same period in 2018: HK $3.397 billion), an increase of 13.61% over the same period last year, and an increase of 8.3% in the first half of 2019. Of this total, revenue in the third quarter was HK $1.374 billion (the same period in 2018: HK $1.037 billion), an increase of 33% over the same period last year, slightly below our expectations. The increase in income was mainly due to an increase of HK $193 million in construction income, HK $8585 million in rental income, HK $2320 million in service income and HK $3547 million in other types of income. The increase in construction income is mainly due to the construction of river basin treatment projects, as well as a number of sewage treatment projects and upgrading projects under construction. The increase in revenue is due to the investment of some new projects and the improvement of some projects. The increase in operating income was due to an increase in contractual assets.
The company's gross profit was 1.382 billion Hong Kong dollars (2018 same period: 1.61 billion Hong Kong dollars), an increase of 19.1 percent over the same period last year. The gross profit growth rate in the first half of 2019 increased by 2.3 percentage points, of which the gross profit in the third quarter was 462 million Hong Kong dollars (2018 same period: 373 million Hong Kong dollars), an increase of 24 percent year-on-year. The company's direct costs and operating expenses in the third quarter of 2019 were HK $912 million (the same period in 2018: HK $664 million), an increase of 37% over the same period last year. This is mainly due to an increase in construction costs due to an increase in construction services. Construction revenue in the third quarter of 2019 was HK $685 million, compared with HK $492 million in the third quarter of 2018. The company's overall gross profit margin fell to 34% in the third quarter of 2019 (compared with 36% in the same period in 2018). The main reason is that construction revenue in the third quarter of 2019 accounted for slightly higher than in the third quarter of 2018, construction revenue accounted for about 57% of total revenue in the third quarter of 2019 (same period in 2018: 54%).
The profit attributable to equity holders of the company in the first nine months of 2019 was HK $603 million (the same period in 2018: HK $515 million), an increase of 17.1% over the same period last year, and the growth rate in the first half of 2019 was 3.7%. Of this total, the profit attributable to equity holders in the third quarter was HK $183 million (the same period in 2018: HK $144 million), an increase of 27% over the same period in 2018. The profit share of the company's equity holders should exceed our expectations, mainly due to the company's efficient cost control.
We have obtained several sewage treatment projects in Shanxi Province, and the production capacity has been increased steadily.
In November 2019, the company obtained the sewage treatment PPP project in Nantang Yexin area and the sewage treatment and construction project in the northern suburbs of Zibo. The project of Tangyexin District, which is organized by Everbright Water Engineering Co., Ltd., is operated, constructed and operated in PPP mode. The project company has a special license period of 30 years. The company holds 99.9% shares of the project company and mainly provides sewage treatment services to Tangyexin District of Yunnan City. The total sewage treatment pattern per day is 45,000 cubic meters (including 25000 cubic meters in Phase I and 20000 cubic meters in Phase II). The total investment is about 313 million yuan. The sewage treatment and disposal project in the northern suburbs of Zibo will be built in BOT mode, with an investment of 8300 million yuan, with a special operating period of 30 years, and 20,000 cubic meters of sewage will be treated per day. The company's sewage treatment capacity continues to grow steadily, and it is expected that it will continue to promote the further development of the company's business through its extension projects.
Maintain the "entry" level
Our forecast for the company's FY19/FY20/FY21 annual income is 5.9.86 billion yuan, an increase of 13.16% over the same period last year, an increase of 10.93% and 7.02%, and the share of equity is 7.881 million yuan, an increase of 16.63%, 11.63% and 9.23%, respectively, and the corresponding EPS is 0.28744, 0.3185 and 0.3453 respectively. The overall figure is 2.66 Hong Kong dollars, corresponding to FY19/FY20/FY21 9.26x/8.35x/7.70x PE, the figure (HKD1.81 as of November 15, 2019) has an increase of + 46.98%, maintaining the "ranking" level.