Fulongma ( Fujian Longma Environmental Sanitation Equipment Co.Ltd(603686) )
Key investment points
Event: the company released its annual report for 2021, which realized an operating revenue of 5.702 billion yuan, an increase of 4.75% and a net profit attributable to the parent company of 340 million yuan, a decrease of 23.13%, lower than our expectation; It is proposed to distribute a cash dividend of 2.50 yuan for every 10 shares to all shareholders, with a dividend rate of 1.74%.
The revenue of environmental services grew steadily, and the business proportion increased to 60%. Affected by rising industry costs and intensified competition, the company’s comprehensive gross profit margin decreased by 5.68pct to 21.42% in 2021. In terms of business, 1) sanitation services: the revenue was 3.381 billion yuan, an increase of 11.68%, accounting for 59.72% of the main revenue; The gross profit margin was 23.29%, down 2.46pct. 2) Environmental sanitation equipment: the revenue was 2.114 billion yuan, down 11.01% at the same time, accounting for 37.36% of the main revenue, and the gross profit margin was 19.31%, down 6.40 PCT at the same time. 3) New PPP project construction services: revenue of 149 million yuan, gross profit margin of 10.68%. 4) New power sales services: revenue of 16 million yuan, gross profit margin of 17.90%.
The real gross profit margin of environmental services continued to increase, and the new signing was steadily promoted. In 2021, the company’s apparent gross profit margin of environmental services decreased at the same time, mainly due to the expiration of preferential tax policies for the epidemic. Considering the reduction of comparable caliber, the company’s real gross profit margin of environmental services continued to rise, up 3.19pct compared with that in 2019, demonstrating the company’s gradually mature and stable operation ability in the environmental services market. In 2021, the company increased the annualized amount of environmental services by 635 million yuan and the total contract amount was 2.915 billion yuan. By the end of 2021, the annualized contract amount of environmental services performed by the company was 3.751 billion yuan, the total contract amount was 30.215 billion yuan, and the total contract amount to be performed was 20.515 billion yuan. In 2022q1, the company added 10 environmental service projects, with an additional annual amount of 152 million yuan and a total contract amount of 54800 yuan. The company continued to make steady progress in signing new environmental sanitation orders, focusing on Business & Regional two-way expansion and expanding the scope of services.
The sales volume of sanitation equipment increased slightly, and the cost went up, and the gross profit margin was under pressure. Affected by the rising price of raw materials, changes in product structure and intensified competition, the unit price and gross profit margin of environmental sanitation equipment have declined to a certain extent. In 2021, the company sold 7134 sets of environmental sanitation equipment, an increase of 3.15% at the same time. Among them, the sales volume of new energy equipment was 293, down 16.76% at the same time. The market share of sanitation equipment is 5.91%, and that of new energy sanitation equipment is 6.55%, ranking third in the industry. The gross profit margin of environmental sanitation equipment decreased by 6.4% to 19.31%, of which the gross profit margin of new energy environmental sanitation equipment decreased by 13.43pct to 20.26%. With the decline of commodity prices and downstream favorable prices of products, the profitability of the company’s equipment is expected to return to a reasonable level.
The account period of accounts receivable was extended, and the operating cash flow was under pressure, with a year-on-year decrease. In 2021, the net operating cash flow of the company decreased by 86.19% to 121 million yuan, mainly due to the changes in accounts receivable and the decrease in payment received due to the lag of government payment for environmental sanitation services and the longer accounting period of environmental sanitation equipment enterprises.
Profit forecast and investment rating: considering the impact of macroeconomic and financial affordability, the large-scale speed of environmental sanitation service and equipment industry slows down, and the price of bulk commodities continues to rise, and the cost pressure of equipment enterprises is large. We will lower the net profit attributable to the parent company from 579 / 683 million yuan to 428 / 490 million yuan in 20222023, and it is expected that the net profit attributable to the parent company will be 571 million yuan in 2024. The current market value corresponds to 10 / 9 / 8 times of PE in 20222024, maintaining the “buy” rating.
Risk tip: the improvement of market-oriented rate is less than expected, the sales of equipment is less than expected, and the market competition is intensified
