Items:
Company announcement, and Hebei Shenglian energy conservation jointly funded the establishment of Jijin water, the company contributed 6.5 million yuan, accounting for 65% of the share ratio; the joint venture company is responsible for the implementation of the "Jizhou salt and chemical circular economy park water supply and reclaimed water BOT project".
The board of directors examined and passed the "proposal on the estimated maximum loan line for 2017", proposing that, combined with the 2017 business forecast, the company expects a maximum loan line of 2 billion yuan in 2017.
Comments:
Order accelerated verification enters the inflection point of expansion
The company has set up a joint venture company in Jizhou City, Hebei Province, the cooperation content is the salt chemical circular economy park water supply and reclaimed water BOT project. The company's orders have accelerated since December 2016. at present, the total amount of projects on hand is more than 2 billion yuan, gradually verifying that the company has entered the inflection point of expansion.
Increase the speed with lever to help PPP land
The company has always been mainly engaged in membrane equipment sales and membrane engineering, all of which are light asset business, and the company's debt level has always remained low, with a debt ratio of 37% at the end of the quarter of 2016. In terms of industry development, PPP will become the mainstream mode of water-related environmental protection projects, and the financial strength of related companies directly determines the implementation ability of PPP projects. According to our calculations, under the assumption that the company's debt ratio is raised to 70%, the company's borrowing limit is 2.4 billion yuan, which is 3.9 times the 2015 income, which shows that the company's finance plus leverage is more flexible to promote PPP. The board meeting expected a maximum loan line of 2 billion yuan in 2017, which also confirmed that the company will accelerate the landing of PPP projects by increasing leverage.
Major asset restructuring to make up for shortcomings, work together to promote the development of the company
The company is promoting a major asset restructuring, the acquisition of Jiangsu Kaimi and Jinqiao Water Science. Through the acquisition of Jinqiao Water Science, the company has made up for the shortcomings of engineering qualifications, clearing the way for the development of PPP; after the acquisition of Jiangsu Cami, the company will become the most comprehensive membrane product supplier in China. In addition, the restructuring will make the company's shareholder structure more diverse. Tianjin membrane (17%), Hi-tech Investment (14.03%) and Jiangsu Kaimi Wang Huailin (11.61%) may jointly participate in corporate governance through the way of the board of directors. Under the equity binding, the company has the same goal and the governance structure is further straightened out, which will work together to promote the rapid development of the company.
Risk factors.
The implementation progress of the project is not as expected; the major asset reorganization failed.
Profit forecast and rating
Maintain a "buy" rating. Since December 2016, the company's orders have accelerated, and the amount of projects on hand has exceeded 2 billion yuan. In 2017, the borrowing limit has been raised to 2 billion yuan, which confirms that the company will accelerate the landing of PPP projects by increasing leverage, thus bringing performance flexibility. Consider that the restructuring will be completed in 2017, maintaining the forecast of 0.25 EPS 0.60 Universe 1.91 yuan respectively from 2016 to 2018, and the current share price corresponding to PE is 65-28-18 times. The price of restructuring, rights issue and three-year private financing is 15.22 yuan, and the current share price premium rate is low (11.0%), with a high margin of safety. Taking into account the company's ownership structure, management team and performance inflection point, the subsequent PPP project continued to obtain contribution to the performance of greater flexibility, given in 2017 40 times, corresponding to the target price of 24.0 yuan, maintaining the "buy" rating.
