Event: first-quarter revenue of 150 million yuan, yoy of 86.5%, return to the mother net profit of 18.98 million yuan, yoy of 47.5%.
The Higang Leting project is progressing smoothly, and the company's revenue and net profit increased in the first quarter. In 2018, the company won the bid for Hebei Leting steel water treatment EPC project with a total contract price of 372 million yuan, which is expected to be completed in 2019. Benefiting from the expansion of Hegang Leting project and other industrial sewage projects, the company's first-quarter revenue was 150 million yuan, yoy was 86.5%, net profit to its mother was 18.98 million yuan, and yoy was 47.5%. The gross profit margin of sales was 31.1%, compared with 36.8% in the same period last year. The main reason for the decline may be the higher cost of the pre-project of the Hebei Leting project.
Equity incentive amortization increases current management costs and increases investment in research and development. The company's management fee in the first quarter was 15.22 million yuan, an increase of 64.3%, mainly due to the amortization of equity incentive expenses and the increase in the cost of new mergers and acquisitions last year. The R & D expenditure was 8.64 million yuan, an increase of 58.2%. The company invested more in the field of industrial sewage.
EPC project volume, current assets, short-term loans increased. In the first quarter, the company received 85.96 million yuan in bills, 51% yoy, 61.64 million yuan in advance, 33% yoy, 43.93 million yuan in short-term loans, and 135% yoy, mainly due to the construction of the Higang Leting EPC project; the net cash flow of operating activities was-37.25 million yuan, and yoy was 405%, mainly due to the advance funds of the EPC project.
Upstream profit improvement-third-party treatment accelerates the release of industrial sewage industry demand. The supply-side reform has increased the concentration of iron and steel, petrochemical and papermaking in the upstream, and increased profitability. under the background of large enterprises' profits, enterprises' ability to pay for pollution control has been improved, and industrial sewage has benefited. At the same time, in August 2017, the Ministry of Environmental Protection issued the implementation opinions on promoting the third-party treatment of environmental pollution, which clarified the management methods of the third-party control of industrial pollution from the top level and implementation rules. In contrast, the third-party treatment of industrial pollution can improve the pollution control efficiency of industrial enterprises, enhance the efficiency of government environmental law enforcement, and reduce the environmental risk of emergencies. Enterprises with higher upstream profits are expected to adopt more third-party industrial sewage treatment.
Profit forecast. Under the background of environmental protection inspector, the demand for industrial sewage treatment is released. As the leader of domestic industrial sewage treatment, the company will gradually open up a larger industrial treatment market through benchmarking projects such as Hegang and China Petroleum & Chemical Corp. It is estimated that the 2019-2021EPS will be 1.58 2021EPS 2.40x3.26 yuan per share, corresponding to the PE valuation of 22.9X/15.1X/11.1X, maintaining the "buy" rating.
Risk tips: 1, the expansion of industrial park projects is not as expected; 2, the expansion of electronics and medicine is not as expected; 3, the income of the paper industry is declining.