Events:
On the evening of May 7, 2018, the company announced that the company had won the bid for the ecological water system construction project PPP in Gongyi City, with a total investment of about 1.397 billion yuan and a cooperation period of 23 years, including 3 years of construction and 20 years of operation. In this regard, our comments are as follows:
Main points of investment:
The water environment comprehensive treatment project will be the next city, and the industrial chain will fully enter the order harvest period.
The contents of the PPP project of the ecological water system construction project in Gongyi City are the Xisi River Project and Dongsi River Project, the third section of the "four rivers and one reservoir" comprehensive treatment project in Gongyi City, with a total investment of about 1.397 billion yuan and a cooperation period of 23 years, including 3 years of construction and 20 years of operation.
The company's water environment comprehensive management project is the next city.
Based on urban sewage treatment and central heating, the company continues to expand the industrial chain, which has been extended to reclaimed water reuse, biogas utilization, construction waste, village sewage, watershed treatment, sludge treatment, photovoltaic and other fields. At the end of 2017, the company acquired 55% of the urban and rural shares in Henan Wujian, obtained the engineering qualification, and constantly improved the industrial chain to build a comprehensive environmental service provider, and began to enter the project harvest period. Since 2017, we have successively invested and won the bid for Yichuan and Chen Sanqiao Phase II (689 million yuan), Linying Phase II (90 million yuan), Xinmi City sewage treatment and gully comprehensive treatment and ecological restoration project (3 billion yuan), Xinyang City Mianhe Phase III water environment comprehensive treatment PPP project (2 billion yuan), Zhongmou County rural sewage project (136 million yuan), Yiyang County sewage treatment and drainage Network (Phase I) Project (205 million yuan) The total investment exceeds 6.142 billion yuan Continue the first-class order-taking ability in 2018 Successively won the bid for Minquan County Water Engineering Integration Construction and Reconstruction Project (815 million yuan), Fangcheng County Central District Panhe and Sanli River Environmental Comprehensive treatment Project (945 million yuan), Fangcheng County Central District Ganjiang River, S103 Line Environmental Comprehensive treatment and Longquan Park Project PPP Project (819 million yuan), Neihuang County Liuhe Gully and nitrate River Environmental Control Project PPP Project (761 million yuan), Water Conservancy Bureau of Shangcai County on the PPP Project of Comprehensive Control of du Yigou in Shangcai County (853 million yuan) Coupled with the ecological water system construction project in Gongyi City (1.397 billion yuan), with a total investment of 5.59 billion yuan, with the acceleration of the environmental protection PPP project in Henan Province, as the only large state-owned environmental protection platform in the province, the company is expected to harvest more projects by virtue of the advantages of industrial chain and government resources, and the company is about to enter the order harvest period.
Governance solution + sufficient order + expected injection of assets, regional environmental protection platform has entered a period of rapid development.
In 2016, the company solved the problem of inter-industry competition with shareholders through major asset restructuring. In March 2017, the company's first largest shareholder (sewage purification) and second largest shareholder (Thermal Power Corporation) transferred the company's shares to the public utility group, which solved the problem of corporate governance. At the same time, the company continues to improve the industrial chain, orders into the harvest period, the current on-hand orders of more than 11.7 billion yuan, the regional environmental protection platform is about to enter a period of rapid development.
In addition, considering that Zhengdong New area sewage treatment Plant (1 million tons / day) and Shuangqiao sewage treatment Plant (600000 tons / day) will be injected into listed companies in the future, at the same time, the controlling shareholder Public Utilities Group has assets such as heat, water, garbage power generation, etc., the possibility of injection into listed companies in the future cannot be ruled out. Sufficient orders + asset injection, the company's development prospects are worth looking forward to.
Profit forecast and investment rating: maintain the company's "overweight" rating. Taking into account the decline in performance growth caused by the government's buyback of Shuangqiao sewage treatment plant (400,000 tons / day) and the company's PPP construction period has not yet recognized revenue and profit, we downgrade the company's profit forecast, the company is expected to 2018-2020EPS of 0.51,0.54,0.59 yuan, corresponding to the previous share price PE is 27,25,23 times, but if the PPP project construction period to confirm revenue and profits are expected to bring some performance flexibility At the same time, we are optimistic about the development prospects of the water environment industry, so we maintain the company's "overweight" rating.
Risk hints: the risk of the decline of sewage treatment charges, the risk that the expansion of the PPP project is not as expected, the risk of a substantial increase in accounts receivable, the risk of unrecognized income and profits during the construction of the PPP project, the risk of future acquisition and asset injection of the company, the risk that the project is not advanced as expected, and macroeconomic downside risks.
