Events:
The recent announcement of the company: 1) the net profit of shareholders belonging to listed companies in 2017 was 14152.25-169.827 million yuan, up 0-20% from the same period last year. 2) it is proposed to acquire 100% shares of Jiangsu Kangbo solid waste held by Yongqing Group and Hangxiang Swan at a price of 10.02 yuan per share, with a transaction consideration of 1.075 billion yuan. In this regard, our comments are as follows:
Main points of investment:
The performance is in line with expectations, and the business is advancing steadily.
In 2017, the net profit attributed to shareholders of listed companies was 14152.25-169.827 million yuan, an increase of 0-20% over the same period last year, which is in line with market expectations. The main reason for the growth in performance is the steady progress of the company's various businesses. Atmospheric governance business: as the company's traditional business, the development is relatively stable. By virtue of technical advantages to obtain thermal power smoke control projects of state-owned power generation enterprises, after the peak of ultra-net emissions in thermal power industry, the company has project experience in iron and steel, non-ferrous, paper and other industries, which will benefit from the spring of smoke control in non-power industries. Soil remediation business: the company has successively obtained projects in Shandong, Sichuan, Jiangsu and other places, and the number of orders far exceeds that of the same period last year. At the beginning of 2018, the company won a 570 million yuan project for comprehensive treatment of heavy metals in Taojiahe. With the introduction of soil law, it is expected that soil remediation will break out; garbage power generation business: with the commissioning of Hengyang project, garbage power generation revenue has increased rapidly. Environmental consulting business: the qualification expansion of EIA was approved in July 2017, comprehensively promoting business development from the perspective of technical team and regional layout, and achieving rapid development of environmental consulting business.
With the proposed acquisition of Jiangsu Kangbo solid waste, the company has entered a new stage of development.
At a price of 10.02 yuan per share, the company issued a total of 107 million shares to the controlling shareholders Yongqing Group and Hangxiang Swan to buy its 100% stake in Kangbo solid waste, with a transaction consideration of 1.075 billion yuan. Combo solid waste promised to deduct non-net profit of not less than 106 million yuan, 105 million yuan and 113 million yuan from 2017 to 2019, with a net profit of only 10 times PE, with a relatively reasonable valuation.
Kangbo solid waste is the largest harmless waste disposal project in Jiangsu Province. at present, it has 17 types of hazardous waste treatment qualifications, with an annual disposal capacity of 38000 tons. Through the acquisition of Combo solid waste, on the one hand, the company promises to thicken the company's performance, on the other hand, the company enters the hazardous waste industry with high prosperity, which can improve the company's industrial chain and build a comprehensive environmental service provider. The company layout flexible performance of soil remediation engineering and stable performance of hazardous waste treatment operations, dual-core drive, the company's development is about to enter a new stage.
Profit forecast and investment rating: for the first time, the company is given an "overweight" rating. Regardless of the impact of the acquisition of Jiangsu Kangbo solid waste on the company's performance and equity for the time being, it is estimated that the company's 2017-2019EPS is 0.25,0.32,0.42 yuan respectively, and the corresponding share price PE is 41,31,24 times, giving the company an "overweight" rating for the first time.
Risk hints: non-electric business expansion is lower than expected, soil remediation business expansion is lower than expected, the risk of acquisition can not be completed smoothly, macroeconomic downside risk
