Fulongma ( Fujian Longma Environmental Sanitation Equipment Co.Ltd(603686) )
Performance growth slowed and profits fell. The company achieved revenue of 1.21 billion yuan (yoy-12.7%) in 2022q1; Among them, the income of environmental sanitation service business is 850 million yuan (YoY + 4.41%, accounting for 70.43%); The income of sanitation equipment decreased significantly, reaching 340 million yuan (yoy-35.0%, accounting for 28.1%); The income from asset construction services of PPP project is RMB 100 million (yoy-79.4%, accounting for 0.8%); The sales revenue of electric power is 10 million yuan. In 2022q1, the company realized a net profit attributable to the parent company of 80 million yuan (yoy-33.7%), mainly due to the expiration of preferential tax policies for the epidemic and the decline of environmental sanitation equipment business income.
The gross profit margin was stable, the operating cash flow decreased, and the management expense ratio increased. In 2022q1, the company’s profit declined, with a comprehensive gross profit margin of 23.2% (yoy-0.2pct) and a net profit margin of 8.3% (yoy-2.0pct). The expenses increased slightly, and the rates of sales, management, R & D and financial expenses were 4.3 / 6.6 / 1.2 / 0.0%, yoy-0.7 / + 2.4 / + 0.1 / + 0.3pct respectively. The net operating cash flow decreased, reaching – 190 million yuan (yoy-19.3%) in 2022q1.
Sanitation service orders continue to win the bid. The environmental sanitation service business has been intensively developed. The company won the bid for 10 environmental service projects in 2022q1, with an annual amount of 150 million yuan in the first year, an annualized net amount of 3.87 billion yuan in Bracelet service, a total contract amount of 30.48 billion yuan and a contract amount to be performed of 19.7 billion yuan. The urban-rural sanitation (urban-rural sanitation) and sanitation (urban-rural sanitation) integrated project of Hangzhou county has won the bid, and the rest of the project is in the stage of urban-rural sanitation (urban-rural sanitation) integrated operation.
The market share of equipment ranks first In terms of sanitation equipment business, the total sales volume of China’s sanitation vehicle industry in 2022q1 is 21046 (yoy-4.07pct). By category, the sales volume of sanitation and cleaning vehicles is 10337 (YoY + 7.58%); The sales volume of garbage collection and transportation vehicles is 10709 (yoy-13.15%). The sales volume of new energy sanitation vehicles is 1074 (YoY + 55.9%), accounting for 5.1% of the total sales volume of sanitation vehicles in China. The total sales volume of environmental sanitation equipment of 2022q1 company is 1097, including 714 environmental sanitation innovative products and medium and high-end operation models, accounting for 65.1% of the total sales volume; The sales volume of new energy sanitation vehicles is 75, accounting for 6.8% of the total sales volume; The sales volume of small intelligent sanitation equipment is 3 sets, accounting for 0.3% of the total sales volume. As of 2022q1, the market share of the company’s sanitation equipment was 4.38%, ranking fifth in the industry, the market share of sanitation innovative products and medium and high-end operating models was 8.10%, the third in the industry, and the share of new energy sanitation vehicles was 5.96%, the fourth in the industry. (CBRC Statistics).
Investment suggestion: relying on the advantages of environmental sanitation equipment, the company vigorously promotes emerging businesses such as environmental sanitation services and solid waste disposal, as well as overseas businesses. The advantage of moving down the industrial chain is obvious. At the same time, the procurement volume of new energy equipment is expected to be released, creating new revenue points. It is estimated that from 2022 to 2024, the net profit attributable to the parent company of the company will be RMB 480 / 570 / 670 million respectively, the corresponding EPS will be RMB 1.2 / 1.4 / 1.6 respectively, and the corresponding PE will be 9.3 / 7.8 / 6.6x respectively. The current valuation level is low and the “buy” rating will be maintained.
Risk tip: the competition of environmental sanitation equipment intensifies and the company’s market share declines; The expansion of sanitation service market was less than expected.
