Zhejiang Heda Technology Co.Ltd(688296) (688296)
Event: on November 31, 2021, the company announced that it had signed a joint venture agreement with Zhejiang Jiayuan environment group to invest in the establishment of the joint venture "Zhejiang Jiayuan Heda water affairs Co., Ltd. Zhejiang Heda Technology Co.Ltd(688296) with a capital contribution of 4.9 million yuan, accounting for 49%, and Jiayuan environment with a capital contribution of 5.1 million yuan, accounting for 51%. The joint venture plans to carry out business layout in the secondary water supply to help the professional operation and peacekeeping services of the secondary water supply with science and technology.
Establish a joint venture to enter the secondary water supply industry: the company and Zhejiang Jiayuan environment establish a joint venture "Zhejiang Jiayuan Heda water affairs Co., Ltd." the business scope of the joint venture: secondary water supply comprehensive management platform and secondary water supply equipment, etc. The establishment of a joint venture to enter the secondary water supply industry marks the expansion of the company from water informatization to smart water hardware equipment, and the company will also move forward from water informatization company to smart water integration solution company. With the arrival of the intelligent transformation process of China's water pipe network, the company has been deeply engaged in the water information industry and created an industry benchmark in leakage management and drainage information. The company's "leakage management system" has been rated by the Ministry of housing and urban rural development as reaching the international advanced level in real-time explosion and leakage early warning and positioning technology. With the technical support of the company for 15 consecutive years, Shaoxing water has reduced the leakage rate of urban water supply from more than 20% to less than 5%, and maintained the benchmark achievement of less than 5% for 10 consecutive years.
With the arrival of the intelligent transformation of China's water pipe network, the industry beta effect is significant: the market ignores the market scale and investment opportunities brought by the transformation of China's water pipe network, According to our calculation, the scale of China's smart water market will reach 100 billion yuan (including software + hardware + equipment) every year by 2025. Since 2019, the performance of mainstream water meter listed companies ( Ningbo Water Meter (Group) Co.Ltd(603700) , Suntront Technolocy Co.Ltd(300259) , Sanchuan Wisdom Technology Co.Ltd(300066) ) has exceeded market expectations, and the industry's smart water meters have replaced mechanical water meters. Since 2020, it has started with Zhejiang Heda Technology Co.Ltd(688296) , Wpg (Shanghai) Smart Water Public Co.Ltd(603956) The water informatization income of industry smart water companies represented by, etc. increased significantly; In August 2021, the national development and Reform Commission and the Ministry of housing and urban rural development revised the measures for the administration of urban water supply prices and the measures for the supervision and review of urban water supply pricing costs, clearly incorporating the requirements of water informatization and intelligent water equipment, and the era of intelligent transformation of China's water pipe network officially came.
On August 6, 2021, the national development and Reform Commission and the Ministry of housing and urban rural development revised and issued the measures for the administration of urban water supply prices and the measures for the supervision and examination of urban water supply pricing costs, which provided a policy basis for the rise of water prices. The increase of water price has greatly enriched the profit level of the water plant and provided funds for the intelligent transformation of the water pipe network: the new price system gives the water supply enterprises the allowable rate of return, which greatly promotes their capital expenditure on the informatization and intelligent transformation of water affairs. Taking Shanghai as an example, in 2020, the daily water supply volume of Shanghai municipal water supply enterprises will be about 7.94 million tons. If the water price increases by 0.5 yuan / ton on average, the annual profit will increase by about 1.5 billion yuan. During the 14th Five Year Plan period, Shanghai will accelerate the advanced treatment transformation of water plants, synchronously complete the renewal and transformation of 2000 km old water supply pipe network, strengthen the whole process water quality management of raw water, factory water, pipe network water and secondary water supply environment, and improve the drinking water quality of residents.
Profit forecast and investment rating: Based on the fact that the company is the leader of water informatization and several benchmark projects of water supply and drainage informatization have been implemented, we maintain the EPS of the company in 2021-2023 to be 1.11 yuan, 1.58 yuan and 2.32 yuan respectively, corresponding to 43, 30 and 21 times of PE, maintaining the "buy" rating.
Risk warning: the risk of national fiscal policy tightening beyond expectations; The risk that the intelligent transformation process of China's water pipe network is less than expected; The risk of non recovery of the company's accounts receivable, etc.
