The 19Q1 performance of the target of industrial water treatment was + 48% compared with the same period last year, which exceeded expectations.
19Q1 achieved revenue / return net profit of 690 million yuan / 18.98 million yuan, which was + 86.5% and 47.5% compared with the same period last year, and its performance exceeded expectations. The performance growth mainly came from the growth of the new Higang Leting EPC project and related business in the petrochemical industry, as well as the sales and installation business of drug feeding equipment for civil projects. From the point of view of the downstream industry, the relocation of environmental protection drives the high growth of revenue from water treatment in the iron and steel industry and the steady growth in the petrochemical / automobile / civil sector. Taking into account the new investment in Baohui environment, Jiangsu Kangspeer hazardous waste project 19 contributed profits, increasing the 19-21 year EPS 1.55, 2.06, 2.49 yuan (the previous 1.44, 1.91, 2.20 yuan), maintaining the company's 19-year 29-33x Pmax E, with a target price of 44.95-51.15 yuan per share, maintaining "buy".
The pace of epitaxy is steady, and there is still plenty of room for epitaxy plus leverage in the future.
The asset-liability ratio of 19Q1 is only 20%, and there is still a lot of room for extension deposit and leverage. The acquisition of shares in Blue Sky Huanke is intended to join hands with Tianjin Academy of Environmental Sciences to expand the entrance of the project; before the acquisition of Henan Kaishun cautiously tested the water in the field of hazardous waste disposal, deep ploughing the main industry at the same time to extend the industrial chain, 4.10 days notice investment in Jiangsu Kang Speer (planning to apply for a hazardous waste license (waste packaging barrels 92,000 / year), with an average annual net profit of 12.3 million), it is expected to gradually expand to the industrial hazardous waste field with the help of the resource advantages of the industrial field. At the same time, it invested in Zhanjiang project (concentrated salt water concentration and salt extraction zero discharge project, with an average annual profit of 9.26 million) by increasing capital in Baohui Environment (49% holding), and formed an interest community with Baosteel. The quarterly report revealed that the company's 19Q1 investment income was 1.596 million yuan, which was + 1153% compared with the same period last year, mainly due to the increase in environmental net profit and financial income of Baohui.
The operation attribute of light assets remains unchanged, and there is plenty of cash on hand.
The operating attributes of the company's light assets remain unchanged, and the net operating cash flow of 19Q1 is-37 million, a decrease of 30 million over the same period last year, mainly due to the growth of engineering business leading to an increase in advance funds exceeding the amount received, such as the substantial increase in engineering and procurement expenditure for the Leting EPC project in Hegang, and cash flow is expected to improve as EPC project orders land and continue to undertake operating orders. The company has plenty of funds (19Q1 cash on hand 390 million / idle funds purchase financial management 280 million).
Stable growth of operation and flexibility of EPC
Steady growth in the operation sector (water treatment system operation management + chemical sales and services) (18 revenue growth rate 13%, revenue 65% / gross profit 81%), downstream customers are mainly from petrochemical / automobile / iron and steel / paper / civil sectors. Customers are mainly large state-owned enterprises that have served for many years, and customer and project resources are high-quality and stable. Downstream industry: the relocation of environmental protection drives the high growth of industrial water treatment in the iron and steel sector, the steady growth of the automobile / civil sector, and the acceleration of the expansion of the EPC project. Hegang has won a large order of 370 million EPC in the past 18 years (the company undertakes about 270 million, accounting for 65% of 18 revenue), and aims to obtain its operating orders in the future.
Raise the target price by 44.95-51.15 yuan per share to maintain the "buy" rating
Taking into account the new investment in Baohui environment, Jiangsu Kangspeer hazardous waste project 19 contributed profits, increasing the 19-21 year EPS 1.55, 2.06, 2.49 yuan (the previous 1.44, 1.91, 2.20 yuan), maintaining the company's 19-year 29-33x Pmax E, with a target price of 44.95-51.15 yuan per share, maintaining "buy".
Risk hint: the progress of the project is not as expected, the gross profit margin is declining, 14 million (17% of the 18 net profit) investment private equity funds may suffer heavy losses due to illegal management of the other side, and the investment principal and income may not be repaid or paid on schedule. The company is making a reasonable assessment of asset losses and is still waiting to be tracked.