\u3000\u30 Shenzhen Fountain Corporation(000005) 98 Chengdu Xingrong Environment Co.Ltd(000598) )
Event: the company disclosed its 2021 annual report. In 2021, the company realized an operating revenue of 6.732 billion yuan, a year-on-year increase of 25.29%; The net profit attributable to the parent company was 1.494 billion yuan, a year-on-year increase of 15.10%.
Comments:
The income from sewage treatment services and environmental protection business increased rapidly. In 2021, the company achieved an operating revenue of 6.732 billion yuan, a year-on-year increase of 25.29%. In terms of business segments, the revenue from the production and sale of tap water was 2.254 billion yuan, an increase of 12.72% year-on-year, mainly due to the completion and operation of the Jialing River water supply project in Yuechi County; The revenue from sewage treatment services was 2.189 billion yuan, a year-on-year increase of 38.04%, mainly due to the completion and operation of Chengdu Zhonghe sewage treatment plant phase II project and other projects; The revenue of water supply and drainage pipe network project was 961 million yuan, a year-on-year increase of 10.98%. In addition, the revenue from environmental protection businesses such as landfill leachate treatment, waste incineration power generation and sludge disposal increased by more than 40% year-on-year, mainly due to the completion and operation of phase II project of Chengdu Wanxing environmental protection power plant and sludge mixed combustion project. In 2021, the company realized a net profit attributable to the parent company of 1.494 billion yuan, a year-on-year increase of 15.10%. In a single quarter, 2021q4 achieved a revenue of 2.213 billion yuan, a year-on-year increase of 36.42%; The net profit attributable to the parent company was RMB 3.7 billion, a year-on-year increase of 15.82%.
The increase of the company’s financial expenses and the provision of credit impairment losses led to the decline of the net interest rate. In 2021, the company’s gross profit margin was 39.84%, a year-on-year decrease of 0.18 percentage points, and the gross profit margin was relatively stable. Among the three main businesses, the gross profit margin of tap water production and sales was 48.23%, a year-on-year decrease of 1.26 percentage points; The gross profit margin of sewage treatment services was 39.37%, a year-on-year decrease of 0.83 percentage points; The gross profit margin of water supply and drainage network project was 23.04%, an increase of 5.98 percentage points year-on-year. In 2021, the company’s net interest rate was 22.45%, a year-on-year decrease of 2.19 percentage points, mainly due to the increase of the company’s financial expenses and the provision of credit impairment losses. In a single quarter, the gross profit margin of 2021q4 company was 30.00%, a year-on-year decrease of 2.66 percentage points; The net interest rate was 11.76%, a year-on-year decrease of 3.99 percentage points.
The company actively develops the market, and the scale advantage is expected to appear. The company continues to expand its business in Sichuan and expand its business outside the province. It has water environmental protection business in 8 provinces: Sichuan, Gansu, Ningxia, Shaanxi, Hainan, Guangdong, Jiangsu and Hebei. At present, the scale of water supply and drainage projects operated, under construction and proposed by the company is more than 8.5 million tons / day, the scale of reclaimed water utilization projects is more than 1 million tons / day, the scale of waste incineration power generation projects is 12300 tons / day, the scale of sludge disposal projects is more than 3000 tons / day, and the scale of landfill leachate treatment projects is 5630 tons / day. The scale of water environmental protection business ranks first in the West and in the forefront of the country, and the scale advantage is expected to appear.
Investment advice: maintain a prudent recommendation rating. It is estimated that the company’s EPS from 2022 to 2023 will be 0.57 yuan and 0.64 yuan respectively, and the corresponding PE will be 8 times and 7 times respectively, maintaining a prudent recommended rating.
Risk warning: policy promotion is not as expected; Macroeconomic development is less than expected; The construction progress of the project is less than expected.
