I. Overview of events
Recently, we have participated in the company's research.
II. Analysis and judgment
Comprehensive service providers of environmental governance with perfect layout of industrial chain, tightening financing environment
In 2018, the company started with pressure filtration equipment in its early years, went public in 2011, acquired Zhejiang dredging and Shuimei Environmental Protection one after another in 2013 and began to transform into an integrated environmental treatment service provider, and then through mergers and acquisitions of Zhongyi Ecology, Yuantai Environmental Protection and other companies, further improve the layout in the areas of ecological restoration and water quality monitoring. Since the second half of 2017, due to the influence of the national deleveraging policy and the risk of closing positions in the equity pledge of the former controlling shareholders, the company's PPP business promotion is facing greater financing pressure, the speed of project progress has slowed down, and large goodwill has been generated at the same time, resulting in substantial losses in 2018.
The new hope entered the rectification management, the performance returned to growth in the third quarter, and the cash flow improved.
In May 2019, the company announced the change of the actual controller. The New Hope Investment Group agreed to acquire 23.60% of the shares held by Xingyuan Holdings to become the controlling shareholder, and Liu Yonghao became the actual controller. After that, Yan Xuesheng, who worked as an executive in Oriental Garden and Yili Ecology, became the general manager of the company, and brought a professional team with rich experience and fighting spirit. After the new hope is in charge, the new management team combs the business situation comprehensively and efficiently, introduces the new hope and efficient management model, and makes full use of information and digital means to achieve collectivized centralized management and control. For stock projects, the company will conduct "downsizing" negotiations according to the project situation, while strengthening the control of the payback process. The company Q3 achieved a net profit of 36.31 million yuan in a single quarter, + 1378% last year, and a net cash inflow of 33 million yuan from operating activities, an increase of 296% over the previous quarter. Business rectification is beginning to achieve results, and the operating data ushered in an inflection point.
The business coordination of major shareholders has potential, and the development of rural ecological restoration and livestock manure disposal business is worth looking forward to.
Based on the agriculture and animal husbandry industry, New Hope Group has a layout in the fields of fast food consumption, financial investment, real estate travel and so on. It is an excellent private enterprise with 200 billion assets and AAA rating. As an "old friend of farmers", Liu Yonghao, the real controller, has paid attention to the issue of agriculture and rural revitalization for many years. As the main support of the group's green ecological plate, Xingyuan Environment is expected to show its hands in the fields of ecological restoration of mountains, rivers, forests and lakes, small towns with agricultural characteristics, pastoral complexes, livestock and poultry manure disposal, etc., and the new profit growth point is worth looking forward to.
III. Investment suggestions
We are optimistic about the potential of the company in rural environmental protection, livestock and poultry manure treatment and other new business areas after the completion of business clean-up and rectification. It is estimated that in 2019-2021, the EPS will be 0.06x0.08max 0.11, corresponding to the current share price PE 61x49max 34x, while the company's current PB is only 2.24x, which is located in the bottom range since listing. At the same time, there have been positive changes in fundamentals, covering for the first time and giving "cautious recommendation" rating.
Fourth, risk tips:
1, the progress of business consolidation is not as expected; 2, the development of new business is not as expected.
