\u3000\u3 Guocheng Mining Co.Ltd(000688) 296 Zhejiang Heda Technology Co.Ltd(688296) )
Key investment points
Event: 1) the company released its annual report for 2021, realizing an operating revenue of 510 million yuan, a year-on-year increase of 39.6%; The net profit attributable to the parent company was 100 million yuan, a year-on-year increase of 32.4%. 2) The company released the performance forecast for the first quarter of 2022, which is expected to achieve an operating revenue of 65-66 million yuan, a year-on-year increase of 52.7% - 55.0%; The net profit attributable to the parent company is expected to be - 2.35 million yuan to - 1.95 million yuan, with a year-on-year increase of 59.4% to 66.3%.
The business has expanded steadily, and the cost and expense have increased. Under the background of national digital reform and water conservation and energy conservation, the demand for information construction in the water industry is strong. The company has successively won the bid for many large-scale projects such as Jiaxing, Huangyan, Yancheng and Shaoxing. Among them, the order amount of Shaoxing urban water supply intelligent construction pilot project has reached 63.822 million yuan, and the product competitiveness, implementation and delivery and other comprehensive strength have been fully verified; Sales offices have been established in Beijing, Shanxi and Chongqing, the market area has been further expanded, and the follow-up business expansion is expected to accelerate. In addition, due to the increase in the proportion of the company's overall solution revenue, the comprehensive gross profit margin of some projects decreased by 3.19pp to 44.8% year-on-year due to many integrated products and complex initial implementation and implementation; At the same time, the company increased investment in talent introduction and R & D, and the expense rates of sales, management and R & D were 9.6% (+ 0.26pp), 18.3% (- 1.88pp) and 12.5% (+ 1.77pp) respectively. The short-term pressure on the cost and expense side affected the profit performance.
Driven by policy and demand, the industry has a high degree of prosperity. 1) From top to bottom, policies promote the acceleration of intelligent transformation of the industry. In 2020, China's water leakage exceeded 7.8 billion cubic meters, and the average pipe network leakage rate still reached 13.4%, resulting in unnecessary waste of resources and water pollution. The completion and upgrading of water system is related to the national economy and the people's livelihood. The national development and Reform Commission and the Ministry of housing and urban rural development have successively issued policies such as the "14th five year plan" for the construction of water-saving society and the notice on strengthening the leakage control of public water supply official website, which clearly indicates that the leakage rate of urban pipe network needs to be reduced to less than 9% by 2025. At present, the informatization level of a large number of water enterprises is still in the initial deployment stage, urgently needs intelligent transformation and upgrading, and the market space is broad. 2) From bottom to top, downstream customers are highly motivated to pay. Compared with other public utilities, water companies are responsible for their own profits and losses and operate independently, while water conservation and leakage reduction are closely related to enterprise benefits. Downstream customers are more willing to actively embrace digital transformation. In August 2021, the state issued the measures for the administration of urban water supply prices, which implemented a clear incentive and restraint mechanism for controlling the leakage rate of pipe network, allowing water companies to include information construction into the allowable cost, greatly boosting the enthusiasm of customers, and the industry is about to usher in a great leap forward development.
Complete product matrix and rich project experience Zhejiang Heda Technology Co.Ltd(688296) since its establishment in 2000, it has been deeply engaged in the field of water information. It has outstanding technical advantages in intelligent sensing terminal and water information system. It is one of the few technical service providers that can provide software and hardware integrated whole process solutions; The company has served more than 300 cities and more than 600 water enterprises, with a solid leading position and many benchmark projects. Among them, the cooperation project with Shaoxing water has controlled the leakage rate below 3%. The company is expected to obtain a large number of orders with the leading advantage of "technology + resources". Many new water plants have taken the company's products as standard configuration. At the same time, there are still a large number of construction and upgrading needs of old customers every year, which will boost the company's performance to achieve high-speed and high-quality growth.
Profit forecast and investment suggestions. It is estimated that the compound growth rate of the company's net profit attributable to the parent company from 2022 to 2024 will reach 44.83%. China's water system has obvious pain points and serious pipe network leakage, so the intelligent transformation of water industry is imperative; The national policy has been continuously promoted, the water information construction has been included in the allowable cost, the enthusiasm of downstream enterprises is high, and the prosperity of the industry has been greatly boosted Zhejiang Heda Technology Co.Ltd(688296) has been deeply engaged in the intelligent water industry for more than 20 years, providing an overall solution integrating software and hardware. With outstanding technical advantages and numerous benchmark projects, it is expected to expand its leading edge and realize the rapid expansion of business. Give the company 25 times PE in 2022, corresponding to the target price of 34.50 yuan, and give a "buy" rating for the first time.
Risk tip: the policy promotion is not as strong as expected; The recovery of gross profit margin is less than expected; The epidemic situation repeatedly affects the delivery; Intensified industry competition, etc. sixty-four thousand eight hundred and forty-eight
