Beijing Originwater Technology Co.Ltd(300070)
Annual report for 2021
2022038
April 2022
Section I important tips, contents and definitions
The board of directors, the board of supervisors and the directors, supervisors and senior managers of the company guarantee that the contents of the annual report are true, accurate and complete without false records, misleading statements or major omissions, and bear individual and joint legal liabilities.
The person in charge of the company, Wen Jianping, Du Xiaoming, the person in charge of accounting, and Xu Yan, the person in charge of accounting organization (Accounting Supervisor), declare that they guarantee the authenticity, accuracy and completeness of the financial report in this annual report.
All directors have attended the meeting of the board of directors to consider this report.
Any content in this report involving future plans, performance forecasts and other aspects does not constitute the company's commitment to any investors and related persons. Investors and related persons should maintain sufficient risk awareness and understand the differences between plans, forecasts and commitments.
The company shall comply with the disclosure requirements of "energy conservation and environmental protection service business" in the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 4 - gem industry information disclosure.
The company invites investors to carefully read the full text of this annual report and pay special attention to the following risk factors:
1. Membrane technology promotion and market competition risk
Although membrane technology has strong advantages over traditional sewage treatment technology in terms of effluent quality, floor area and sludge output, projects with low requirements for effluent quality still have relatively high weaknesses in investment cost and operation cost, forming the limitations of membrane technology in the application of projects with low requirements for effluent quality. Membrane technology has been rapidly developed and more widely used in recent years. For projects with reclaimed water reuse and effluent quality reaching national class a standard or above, membrane technology has certain advantages in technical and economic indicators, but its market share is still small compared with traditional technology, and it still faces the challenge of traditional technology in the water treatment market. Although the company has been in a comprehensive leading position in the field of membrane technology in China, and the fact that CCCC China urban and rural become the controlling shareholder of the company will further effectively promote the application of membrane technology and the development of market projects, the company still faces challenges from other competitors outside China in the market. Therefore, if the company cannot maintain its advantages in technological innovation, cost management, business scale, brand, technology, service and human resources, the market competition risk will be further increased.
2. Risk of technological innovation leading
Membrane technology is an interdisciplinary high-tech rising in recent years, and its development has been highly valued by many countries. China has included the membrane technology industry in the national strategic emerging industry development plan, highlighting China's attention to membrane technology. At present, many well-known foreign enterprises, including Suez and Mitsubishi, are involved in this field, which intensifies the innovation competition of products and technologies in the membrane technology industry. Driven by the strong market demand in China's water treatment field, the innovation of the company's membrane technology changes with each passing day. In recent years, the company has continued to iteratively upgrade its products and continuously develop new products. It has achieved remarkable results in many fields such as microfiltration, ultrafiltration and nanofiltration, and has been applied on a large scale, and has always been in the forefront of the market. In recent years, similar companies have emerged in China's membrane industry, and some environmental protection technology enterprises with membrane technology as the core business have landed in the capital market. China's outer membrane technology companies pay attention to the innovation and R & D of membrane technology and the competitive situation, which makes the company face the risk of keeping ahead in technological innovation. As the "chain leader unit" in the water industry of CCCC, China urban and rural areas will further promote the company to strengthen technological innovation and R & D and continue to maintain the leading position of the company's membrane technology.
3. Business development risk
China's sewage treatment industry has entered the stage of market-oriented reform. The marketization of China's sewage treatment industry has achieved remarkable results, but it also means that the resources of high-quality sewage treatment projects have been reduced. In recent years, China's sewage treatment market has shown the characteristics of intensified mergers and acquisitions and small and medium-sized projects. The limited market space and the diversification of project acquisition methods will bring new challenges and resistance to the further expansion of the company's business. While the sewage treatment project has attracted social attention, it also tilts the trading advantage to the seller, and increases the cost of the company's participation in the sewage treatment project to a certain extent. At the same time, the inherent geographical segmentation of China's sewage treatment industry and other factors that are not conducive to market-oriented reform still exist, which makes it more difficult for the company to enter the new sewage treatment market, especially to obtain projects with low risk and stable income, and affects the further development of the company's business in the future. Although the nature of the company has been changed from a private company to a listed company controlled by a central enterprise, in the face of open and transparent market competition, business development risks still exist, and the future business scale development of the company is still facing challenges.
4. Talent shortage and brain drain risk
At present, the company is in a stable growth period. At the same time, with the national policy adjustment on PPP and environmental protection industry in recent years and the introduction of strategic investors into China's urban and rural areas, the company's nature and positioning have gradually changed. At present, it is in the stage of transformation and adjustment. At this stage, the company not only needs further steady expansion in business field and scale, but also needs to comprehensively manage the project development of the company in various regions through high-quality management and innovative compound talents. Talent competition is one of the most important factors in the market competition of membrane water treatment technology. After more than ten years of business accumulation, the company has a high-quality technical talent team, which is an important basis for the company's strong competitive advantage. The company's existing core technical personnel have accumulated rich experience in technology, product development and application, and the development of the company depends on the above personnel to a high extent. The talent competition strategy of enterprises in the same industry outside China may have a certain impact on the stability of the company's technical talents, and the company has the risk of loss of technical talents. How to maintain efficient innovation on the channel of stable development, accelerate integrated development, improve management level, attract and retain talents is the challenge that the company always faces.
5. Risk management
In recent years, the rapid expansion of the company's business scale has increased the difficulty of the company's business management, organization, finance and production management to a certain extent, and put forward higher requirements for the effectiveness of the internal control system. At present, there are hundreds of participating and holding companies under the company. Although the company has formed a relatively complete set of internal management system, due to the differences in geographical distribution, humanities and corporate culture among branches, there may be management risks of insufficient control over holding subsidiaries due to inadequate management and other factors, which may have an adverse impact on the company's operating performance. Therefore, it also puts forward higher requirements for the comprehensive management of the company. At the same time, the company is in the stage of transformation and adjustment. Therefore, how to do a good job in comprehensive management, especially the formulation of incentive mechanism, is particularly important for a fast-growing innovative enterprise. With CCCC urban and rural China becoming the controlling shareholder of the company, the rich management experience, advanced management mode and standardized management system of central enterprises will inject new energy into the company's management.
6. Seasonal risk
The company is mainly engaged in the overall technical solution business of the environmental protection industry. The main customers of the company are local governments or their platform enterprises. Therefore, the project progress and project payment settlement are affected by the government budget and expenditure and have obvious seasonal characteristics. Generally, the first half of the year is the stage of technical scheme preparation, project initiation and design, and the project implementation and payment collection are mainly concentrated in the second half of the year. Therefore, the cash flow of the company has seasonal characteristics.
If the company fails to cope with the seasonal characteristics, especially the non-uniformity of cash flow, it will affect the normal operation and business of the company and bring seasonal risks. With the gradual increase of the company's operating projects and the transformation of project structure, the seasonal risk will gradually weaken.
7. Risk of increase in accounts receivable and decrease in cash flow
With the expansion and increase of the company's business scale and types, especially the increase of EPC projects, as well as the changes of the national macro situation, especially the control of the scale of local government debt and the regulation of financing policies such as reducing leverage, the company's accounts receivable showed a growth trend. Although the aging of the company's accounts receivable is mainly within 2 years, and the company has relatively abundant monetary funds, if the company cannot effectively control the scale of accounts receivable, do a good job in the financing of the project company and the settlement of EPC project funds, and enhance the company's operational cash recovery, it will bring operational risks to the company, especially the risk of short-term cash flow shortage.
8. Risk of policy adjustment of PPP project
China launched the PPP mode policy for investment and financing of infrastructure industry in 2014. Under the policy guidance of giving priority to the promotion of PPP mode in the sewage treatment industry, the sewage treatment industry has mainly developed in the business direction of PPP mode in the past few years. In 2017, following the issuance of the notice on standardizing the management of the project database of the government social capital cooperation (PPP) comprehensive information platform by the Ministry of Finance and the notice on strengthening the risk control of PPP business of central enterprises issued by the SASAC, PPP ushered in a strong regulatory cycle. Subsequently, the Ministry of Finance successively issued documents such as the notice on Further Strengthening the standardized management of government social capital cooperation (PPP) demonstration projects and the implementation opinions on promoting the standardized development of government social capital cooperation, so as to further strengthen the standardized management of PPP business. With the continuous standardization and adjustment of policies, the development trend of PPP business is uncertain. If the relevant national policies are significantly adjusted, it may have a great impact on the operation of the company's stock PPP projects and may cause the risk of impairment of intangible assets.
With the popularization trend of standard raising and transformation all over the country and the higher requirements for public health in the post epidemic era, the application of membrane technology has attracted more and more attention. At the same time, with the further deepening of cooperation with the company's strategic investors, pure water plant PPP projects and EPC projects will gradually increase and become the focus of the company's future business development, and the relevant risks will be gradually reduced. In addition, the company's PPP project has gradually entered the operation period, which will bring sustained and stable cash flow to the company; With the national development and Reform Commission issuing the opinions on innovating and improving the price mechanism for promoting green development in 2018 and the guiding opinions on improving the policies related to the sewage treatment charging mechanism in the Yangtze River Economic Belt in 2020, the improvement of the price mechanism will also provide more guarantee for the company's operating income.
9. Project management and operation stability risk
The Ministry of environmental protection issued the regulations on the management of the list of key pollutant discharge units (for Trial Implementation) in 2017. Many projects across the country have been listed in the key monitoring points of national pollutant discharge outlets. At present, the company has completed the business layout nationwide. The sewage treatment projects are all over many provinces, cities and regions across the country. Some projects of the company also belong to the key monitoring points of the Ministry of environmental protection, which also shows the importance of the project to regional environmental protection. Due to the technical professionalism, the sewage treatment project is different from other engineering projects and has high requirements for technical applicability. Although the company has strengthened the quality management of the project from the aspects of institutional setting, management system, talents and technical support, the company's project is in a period of rapid growth. If the comprehensive and continuous management of the project is not strengthened, there may be a risk of project operation stability. The construction and operation center of the company formulates appropriate project plans according to local conditions and special management measures demonstrated and evaluated by experts according to the characteristics of different regions of each project, strictly implements the project management system, continuously improves the project management system, comprehensively strengthens the project quality management from the aspects of institutional setting, management system, talent and technical support, and carries out irregular self inspection and supervision on the units at key monitoring points, Ensure reasonable and stable operation, etc.
10. Risk of rising financial costs
With the increase of PPP projects of the company, the debt ratio of the company has increased in recent years compared with previous years. In addition, under the situation of national leverage reduction, the change of interest rate also brings certain risks to the company. With the change of bank interest rate, the company's interest also changes to a certain extent. When the capital is tight, the company will also face the risk of increasing loan interest, and the company's financial cost may also increase significantly. At present, with the gradual adjustment of the company's business structure and the deep integration with CCCC group and China's urban and rural areas, the change of the company's nature and the background of state-owned assets attribute make the company's asset liability ratio tend to decline, and the company's future financial cost will gradually develop in the direction of stable reduction.
11. Risk of decline in gross profit margin
In the past few years, the company has maintained a high and stable gross profit margin through unique technologies and products. With the rapid expansion of the company's business, especially the national key promotion of PPP mode in recent years, a large number of PPP projects add more engineering businesses that are not the company's core technology, resulting in the overall gross profit margin of the company decreasing with the expansion of business. Therefore, the company has the risk of reducing the gross profit margin caused by the expansion of business. However, with the rectification of PPP projects by the state and the adjustment of the company's business model on its own initiative, under the background of further deepening cooperation with strategic investors and giving further play to the advantages of independent research and development of core products, the company will gradually return to its main businesses such as urban and rural sewage treatment and high-quality reclaimed water in the future, mainly selling membrane products and providing technical solutions, so as to increase the proportion of high gross profit businesses in this part, The gross profit margin of the company will gradually return to the normal level.
12. Risk of normalization of covid-19 virus pneumonia
Since the spread of New Coronavirus pneumonia in China and the world in 2020, it has had a certain impact on China and the international economy. Since the outbreak of the epidemic, the company's suppliers, customers and other stakeholders have also been affected to varying degrees, resulting in partial delays in procurement, engineering construction, production, sales and other links, and the total construction cost faces the risk of rising. Since 2021, the company has continuously implemented various requirements of prevention and control, strengthened support for epidemic prevention and control, strengthened normalized epidemic prevention and control, and tried its best to reduce the impact of the epidemic on the company's production and operation. However, the covid-19 pneumonia epidemic has the objective situation of long persistence, dot like re outbreak and complete "clearing". The company will continue to pay close attention to the development opportunities under the epidemic economic situation, actively adjust the company's business plan, strive to reduce the relevant impact of the epidemic on the company and continue to promote the high-quality development of the company.
The company will strive to become an environmental protection high-tech enterprise with soul, continue to strengthen the innovation of environmental protection governance concept, environmental protection technology, environmental protection business model and management model, and lead China's environmental protection industry to develop in an innovative, circular, practical and effective direction. Cooperate with CCCC in strategy and business, give play to the creativity and advantages of mixed ownership economy, strengthen and optimize the advantages of the main water industry, further improve the company's ability to serve the national strategy, and become an international leading and China's first-class main force in the field of water industry. The state has promulgated the new environmental protection law, the action plan for water pollution prevention and control, the guiding opinions on promoting the resource utilization of sewage, the Yangtze River Protection Law and the 14th five year plan city
