1H20 performance is in line with our expectations
The company announced 1H20 results: revenue 1.481 billion yuan, year-on-year-2.55%; return to the mother net profit of 122 million yuan, year-on-year-13.62%, corresponding to 0.34 yuan per share, in line with expectations.
Environmental governance business affected by the epidemic declined slightly, business transformation operating income improved significantly.
Due to the impact of the epidemic, the delay in resuming work on the company's construction projects led to pressure on the company's comprehensive environmental management business. 1H20 revenue was 1.313 billion yuan,-7.1% year-on-year, of which soil remediation revenue was-30.0% to 130 million yuan, and water treatment business revenue was-2.87% to 1.18 billion yuan.
The company continued to improve its revenue structure, with 1H20's operating income from + 121.9 to 102 million yuan compared with the same period last year, mainly due to the continued growth of operating assets, and special technical service revenue from + 8.1% to 64 million yuan compared with the same period last year. The company's gross profit margin as a whole is stable at 27.5%.
Cash flow continued to improve, with 1H20's net operating cash flow from + 80.83% to-43 million yuan compared with the same period last year, mainly due to: 1) paying attention to project payback and improving cash collection capacity; 2) receiving 11 million yuan in taxes and fees; and 3) increasing the proportion of operating income by 1.1% to 6.9%.
During the company, the expense rate increased by 0.8ppt to 16.7%, mainly due to a 34% increase in loans compared with the beginning of the year, resulting in an increase in the financial expense rate by 1.0ppt to 6.0%.
The on-hand order of 1H20 Company is 9.951 billion yuan. if the total amount of on-hand orders for PPP projects excluding early investment is nearly 4.331 billion yuan, of which EP, EPC and operation orders account for 94.54%, we believe that on-hand orders are sufficient to ensure the steady growth of the company's performance, and the order structure is optimized, which is conducive to the continuous improvement of the company's cash flow.
Trend of development
SEO completed to improve the financial structure, the introduction of state-owned assets to enhance the company's resources, financial strength. The additional issuance of the company will be launched in July 2020, with a net fund of 563 million yuan, which will be mainly used for the Beibu Gulf hazardous waste project and Hunan equipment manufacturing project. after it is put into operation, it will further enhance the company's share of operating income and strengthen its competitiveness in the field of water treatment. At the same time, the target of this additional offering includes strategic investors with state-owned backgrounds such as Guangxi Environmental Protection Group and Chongqing Environmental Protection Industry Fund, and the company has signed a "Strategic Cooperation Agreement Framework" with Guangxi Environmental Protection Group and Chongqing solid waste. Promote the company's resources and business development, which is conducive to the stable improvement of the company's performance.
Profit forecast and valuation
Keep the rating of "outperforming industry" and the profit forecast for 2020-2021 unchanged at 3.55 yuan and 448 million yuan, and keep the target price unchanged at 14.2,11.5 times the 2020-2021 price-to-earnings ratio, compared with the 10% upside space for the current stock price. The current stock price corresponds to 13.2,10.5 times 2020-2021 price-to-earnings ratio.
Risk.
The advance of orders is not as expected, the progress of additional issuance is not as expected, and financing risk.