The company released the 2020 annual report, the profit has increased steadily; the company's energy-saving business has grown steadily, the power grid business is under short-term pressure, and the acquisition of the remaining EMC assets of State Grid is expected to solve the problem of inter-industry competition; maintain the holding rating.
Support the main points of rating
Profit in 2020 increased by 1% over the same period last year: the company released its annual report in 2020, with an annual operating income of 2.654 billion yuan, an increase of 1.24% over the same period last year, and a net profit of 401 million yuan belonging to shareholders of listed companies, an increase of 1.02% over the same period last year. Of this total, 2020Q4 revenue was 692 million yuan, up 4.88% from the same period last year, down 4.31% from the previous month; profit was 119 million yuan, up 17.20% from the same period last year, down 3.37% from the previous year. The company's performance is in line with our and market expectations. At the same time, the company announced that it intends to distribute a dividend of 2.2 yuan (including tax) to all shareholders for every 10 shares and 4 bonus shares.
Energy-saving business has grown steadily, and profitability has improved slightly: in 2020, the company's energy-saving business achieved revenue of 1.391 billion yuan, an increase of 11.13% over the same period last year, basically completing the revenue plan of 1.4 billion yuan for the whole year; gross profit margin was 36.57%, an increase of 0.44% over the same period last year. We expect the company's energy-saving business to constitute a major component of the annual performance. In addition, the company plans to invest 700 million yuan in capital projects in 2021, with a total revenue of 3.2 billion yuan.
Power grid business profits are under pressure: affected by epidemic prevention and control, downward adjustment of sales electricity prices and other factors, the company's electric power sales and engineering installation business achieved revenue of 1.264 billion yuan in 2020, down 7.79% from the same period last year, and gross profit margin decreased by 2.70% to 2.97%. Profitability is significantly under pressure.
The issue of additional issues has passed, and inter-industry competition is expected to be resolved: the company recently announced that the application for non-public issuance to acquire energy-saving assets and related EMC contract rights and obligations of provincial comprehensive energy companies under the jurisdiction of the State Grid has been examined and approved by the China Securities Regulatory Commission, and the remaining inter-industry competition problems are expected to be solved, while thickening the company's overall profit volume.
Valuation
Under the current equity, combined with the company's annual report, regardless of the impact of the IPO acquisition on the performance for the time being, we adjust the company's forecast earnings per share for 2021-2023 to 0.98x1.04x1.08 (the original forecast for 2021-2022 is 1.08x1.18), corresponding to a price-to-earnings ratio of 19.3ppm 17.5x; maintain the overweight rating.
Major risks to rating
The impact of the epidemic exceeded expectations; the income of energy-saving projects in distribution networks was lower than expected; the landing and construction progress of new projects was slower than expected; and the reduction of sales electricity prices exceeded expectations.