The company's sewage treatment, water supply and reclaimed water business as the basic business, contributing to the main business income. In 2021, the operating income of sewage treatment business, reclaimed water treatment business and tap water supply business reached 3.352 billion, 337 million and 150 million respectively, totaling 3.839 billion yuan, accounting for 85% of the company's total revenue.
During the 14th five-year Plan period, the company focuses on developing new strategic businesses such as new energy cooling and heating, solid waste treatment, distributed photovoltaic power generation and environmental protection technology. The strategic new business will lay out the company's comprehensive environmental service business together with the basic business from the dimensions of business and resources, provide positive support to the company's profitability, and improve the integrity and systematicness of the company's environmental service capability.
Thanks to increased business revenue and lower business costs, net profit increased by 30% in the first half of the year. 2021H1 achieved an operating income of 2.129 billion yuan, an increase of 11.8% over the same period last year, and a net profit of 396 million yuan, an increase of 30.2% over the same period last year. The performance contribution mainly comes from sewage treatment, reclaimed water business, tap water supply and new energy cooling and heating business. In terms of cost, the company realized the electricity expenditure of the sewage treatment business by strengthening the project operation management and focusing on the key costs, and the power consumption of some sewage treatment plants decreased by 13.8%. And through the coordination of sewage treatment and hazardous waste business, the procurement cost of major pharmaceuticals has been reduced by 10%.
The gross profit margin and net profit margin of the company are higher than those of comparable companies, and the asset size and ROE are in the middle. We select energy-saving Guozhen, China holding shares and Biyuan three companies to compare with entrepreneurial environmental protection. In recent years, the gross profit margin and net profit margin of the company have remained stable, and the scale of assets has increased steadily; the gross profit margin and net profit rate of 2022H1 have increased, while the ROE of all companies have declined.
ROE increased, while operating cash flow declined year-on-year due to reduced receipts. 2022H1's ROE was 5.4%, an increase in 0.99pct year-on-year, mainly due to year-on-year revenue growth. The operating net cash inflow of 2022H1 was 322 million yuan, a decrease of 53% over the same period last year, mainly due to a decrease in sewage treatment collection.
Risk tips: environmental protection policies are not as expected, business scale growth is not as expected, the development of strategic emerging industries is not as expected, and municipal environmental protection investment is reduced.
Investment suggestion: we estimate that in 2022-2024, the company's return net profit will be 8.3,9.8 and 1.06 billion yuan respectively, and the year-on-year growth in 2022-2024 will be 20%, 17% and 8% respectively. Give the company 11.5-12.5 times PE in 2022, corresponding to the reasonable value of 6.67-7.25 yuan per share, with a premium of 4% to 13% over the current share price. It will be covered for the first time and given a "overweight" rating.
