Report summary:

Bosch Technology is a leading provider of integrated solutions for water pollution control in China, mainly based in the field of industrial water pollution control. The company was founded in 1999. After years of development, the company's service scope covers the entire environmental protection industry chain including consulting, design, EIA, testing, research and development, equipment manufacturing, engineering construction, investment and operation. In recent years, the company has shown remarkable growth potential by continuously optimizing its business structure and achieving a multi-point layout.

Ning Guo Guogong Holdings has helped the company develop in many ways. At the end of 2023, the company announced that it would move its residence to Ningguo, Anhui, and change the company name from Guangxi Bosco to Anhui Bosco. After Ning Guo Guokong became the controlling shareholder, it helped the company develop steadily and continuously in terms of business support, liquidity support, asset restructuring, and stable control.

Resilient, performance gradually rebounded after the pandemic. As the sanitation and PPP projects undertaken by the company gradually enter the operation stage, the scale of the company's operating assets will continue to expand, and operating revenue will increase year by year. At the same time, the company is actively taking measures to reduce costs and increase efficiency, and the cost ratio and net gross profit are gradually improving.

In 2023, the company's operating costs decreased by about 0.379 billion yuan year on year, a decrease of 19.17%; sales expenses and management expenses decreased by about 43% and 23%, respectively.

There have been significant improvements in both the business structure and order structure. The company adheres to the principle of high-quality development. With its own core technical advantages, the company pursues steady progress in market expansion and ensures a leading edge in traditional business segments. The company's current and new orders are mainly EP, EPC and professional technical service orders, and most of them are projects with strong payment capacity, short cycle times, and strong livelihood attributes such as industrial water treatment, municipal network sewage treatment plant construction, and water operation. In the future, the scale of the company's operating assets will continue to expand, and continuous and stable operating income and cash flow will further enhance the company's hematopoietic function. At the same time, the company actively explores overseas markets, accounting for 6.13% of overseas revenue in 2023, up 1.11pct from 5.02% in 2022.

At the industry level, there are frequent water pollution control policies, which play a positive role in promoting the development of the industry.

In rural areas, there is still plenty of room for growth. Although the soil remediation industry started late, the future market size is considerable.

Profit forecast: Maintain the company's “gain” rating. We expect the company to achieve operating income of 3.301/3.743/4.09 billion yuan in 2024-2026 and achieve net profit of 0.181/0.24/0.318 billion yuan, corresponding PE of 13.50x/10.20x/7.70x, respectively.

Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, changes in small-cap liquidity have exceeded expectations, acquisition and progress of engineering orders have fallen short of expectations, risk of impairment due to large balances of accounts receivable and contract assets, profit forecasts and valuation models have fallen short of expectations