Main points of investment:
1. Events.
The company released a quarterly report that the revenue in the first quarter was 195 million yuan, down 28.24% from the same period last year, and the net profit was 13.95 million yuan, an increase of 19.25% compared with the same period last year. Our analysis and judgment.
(1) the performance is slightly lower than expected and is expected to accelerate in the second half of the year.
The company had forecast a year-on-year increase of 20%, 30%, and the actual performance was slightly lower than expected. The company also predicted that due to the downturn in the downstream industry, the size of the company's hand-on-hand orders had declined, resulting in a 40% decline in half-year performance compared with the same period last year.
We believe that the company's first-half results are affected by seasonal factors and the progress of order settlement. The company's annual report clearly states that the operating target for 2016 is to increase revenue and net profit by 20% and 30%. We believe that the company's performance is expected to accelerate in the second half of the year.
(2) Strategic transformation, energy conservation and environmental protection, and the share of income has increased rapidly.
In 2012, the company introduced Finnish technology and took the first step of strategic transformation of environmental protection business. In 2013, it acquired Laska (formerly Swiss Lonza Project) and entered the general contract of environmental protection projects such as solid waste treatment (high-end pharmaceutical, bio-pharmaceutical, chemical and other environmental protection projects, mainly incinerators). In October 2015, we completed the acquisition of Gerry Environment and expanded the business of sewage treatment and solid waste treatment (one of the earliest professional disposal of hazardous waste in Jiangsu Province). In 2015, Gerry achieved a net profit of 46.95 million yuan, slightly exceeding the performance commitment. On August 20, 2015, Suzhou Sea and Land invested 35 million yuan in Zhenjiang Hehe. Zhenjiang Hehe is an environmental protection enterprise specializing in the disposal and utilization of heavy metal solid waste and the safe landfill of hazardous waste, and has a subsidiary company for industrial wastewater disposal. In addition, Hangzhou Sea and Land, a holding subsidiary, signed a cooperation agreement with Jinjiang Group to expand the municipal waste disposal market.
The company's strategy is to transform the environmental protection contractor and open up the room for growth. The company has a great demand for environmental protection in Jiangsu and Zhejiang, and has more high-quality environmental protection business assets. We judge that the company will not rule out further strengthening the environmental protection business through mergers and acquisitions in the future. In 2015, the proportion of the company's environmental protection business to revenue increased 5.7pct compared with the same period last year. In April 2016, Gerry Environment and Everbright Water signed a "sludge drying Project Construction contract" of 43.89 million yuan. In view of the strong profitability of the environmental protection business, with the continuous growth of the revenue share of the environmental protection business, it will lead to a double improvement in performance valuation.
(3) benefiting from the theme investment in nuclear power, the business of nuclear power equipment is growing at a high speed.
The company's nuclear power equipment products include reactor internal components such as hanging basket barrel, bubbler, safety injection box, heat exchanger, waste liquid recovery tank, etc., and have won important orders for strategic cooperation with Shanghai No.1 Machine tool (under Shanghai Electric), Zhongguang Nuclear Power Corporation and China Nuclear Power Corporation, etc., in the application of Hualong No. 1 nuclear power technology with independent intellectual property rights, CAP1400 third-generation nuclear power technology and high-temperature gas-cooled reactor nuclear power technology with fourth-generation safety characteristics.
The company is carrying out the "third-generation nuclear power nuclear-grade container R & D and industrialization project", which has received an investment of 19.49 million yuan within the central budget. In 2015, the company independently accepted orders for nuclear power products that far exceeded the original single processing manufacturing order, and the strategic transformation was promoted rapidly. In March 2016, the company and the State Nuclear Engineering Co., Ltd. signed a total of 30.44 million yuan in procurement contracts for reactor internal components hanger, PH value adjustment basket and other equipment, and the company's nuclear power business is expected to grow at a high speed.
3. Investment advice.
Considering the acquisition of Grey Environment, it is estimated that the company's EPS for 16-18 will be 0.17, 0.23, and PE will be 0.30 times that of 42-33-25. The company will speed up the strategic transformation to the field of environmental protection and nuclear power, and will not rule out another epitaxial development in the field of environmental protection in the future, and its performance is expected to exceed expectations. Maintain the recommended rating.