\u3000\u3 Guocheng Mining Co.Ltd(000688) 296 Zhejiang Heda Technology Co.Ltd(688296) )
Core view
Event: the company released its 2021 annual report. In 221, the company realized a revenue of 507 million, a year-on-year increase of 39.6%, a net profit attributable to the parent company of 100 million, a year-on-year increase of 32.4%, and a deduction of non net profit of 81.97 million, a year-on-year increase of 14.1%. In addition, the company also disclosed the performance forecast of 22q1, which is expected to achieve an income of 65-66 million (+ 52.7% ~ 55.0%), a loss of 1.95-2.35 million (+ 59.4% ~ 66.3%) attributable to the parent company, and a loss of 2.5-2.9 million (+ 58.6% ~ 64.3%) deducted from non net profit.
The business of water management software and system integration is growing rapidly. Among the revenues of the company, the water management software and system integration business grew rapidly, with an increase of 62.6% and 72.1% respectively, reflecting the increase in the proportion of software and the increase in the demand for overall solutions. The revenue of intelligent sensing terminals was basically the same as that of the same period last year, and the technical services increased by 11.4%, which was relatively stable.
The gross profit margin has decreased, and the R & D expenses have increased rapidly to cope with future business expansion. The company’s water management software and system integration have decreased to a certain extent, mainly due to the increase of project scale and the complexity of first-time implementation and implementation, resulting in the decrease of gross profit margin. Overall, the gross profit margin of the company decreased by 3.2pct to 44.8%. In terms of expenses, in order to cope with the rapid growth of demand, the company has significantly increased its investment in sales system construction and R & D, with the total number of personnel increasing from 647 to 764. During the reporting period, the company’s sales, management and R & D expenses increased by 43.5%, 5.4% and 62.7% respectively, and the overall expense rate decreased by 0.2% to 26.8%. In addition, the company’s net operating cash flow decreased significantly, mainly due to the impact of the increase in large projects and inventory.
Since last year, the favorable policies have continued, and we look forward to entering the accelerated growth cycle this year. Since 2021, the state has continuously issued policies and measures conducive to the development of water informatization industry, including the measures for the administration of urban water supply price and the measures for the supervision and examination of urban water supply pricing cost revised in August last year, which has optimized the investment in water informatization in terms of capital source and incentive mechanism. In addition, in March 2022, The Ministry of housing and urban rural development and the national development and Reform Commission issued the notice on strengthening the leakage control of public water supply networks, and selected no more than 50 cities nationwide for pilot projects. We believe that the introduction of a series of policies will effectively promote the acceleration of industry demand, and Zhejiang Heda Technology Co.Ltd(688296) will fully benefit from mastering core technologies and typical demonstration cases in business fields such as “digitization + leakage control + contract water saving”.
Profit forecast and investment suggestions
Adjusting the revenue growth rate, gross profit margin and expense rate, we predict that the company’s EPS in 22-24 years is 1.36/1.91/2.66 yuan respectively (the original EPS forecast in 22-23 years is 1.71/2.56 yuan). According to the PE level of comparable companies in 22 years, the corresponding PE in 22 years is 28 times, and the target price is 38.08 yuan, maintaining the buy rating.
Risk tips
The implementation of the policy is less than expected; Risk of marketing expansion falling short of expectations
