\u3000\u3000 Zhejiang Heda Technology Co.Ltd(688296) (688296)
Event: on January 14, 2022, the company won the bid of “Huzhou water supply intelligent construction project – Huzhou Water Group Co., Ltd. integrated management digital platform project”, with a bid winning amount of 36.118 million yuan.
The company won the bid for Huzhou smart water supply project, and the company’s smart water territory has been steadily developed: the company won the bid for Huzhou smart water supply project, which is another new urban construction project won by the company, with a bid winning amount of 36.118 million yuan. The project is planned to complete the construction and on-line test before the end of September 2022, complete the preliminary acceptance of the project before the end of 2022, test run for 6 months and complete the final acceptance. The successful implementation of the project will further improve the company’s business undertaking capacity and accumulate experience for the development of subsequent projects.
*** With the advent of the era of intelligent transformation of China’s water pipe network, the transformation of water supply network focuses on intelligent and information construction (intelligent water meter + water informatization); The reconstruction of drainage pipe network focuses on the new laying of drainage pipes. The construction of drainage pipe network is also the top priority to solve urban waterlogging and sewage treatment. Since 2019, from the high performance of intelligent water meter industry and water information companies to the end of 2021, the central economic work conference emphasized the construction of drainage pipe network, and China’s intelligent water has officially moved from intelligent water supply to intelligent water supply and drainage.
With the arrival of the intelligent transformation process of China’s water pipe network, the industry beta effect is significant: the market ignores the market scale and investment opportunities brought by the transformation of China’s water pipe network. According to our calculation, the scale of China’s intelligent water market will reach 100 billion yuan per year by 2025 (including software + hardware + equipment). Since 2019, the performance of mainstream water meter listed companies ( Ningbo Water Meter (Group) Co.Ltd(603700) , Suntront Technolocy Co.Ltd(300259) , Sanchuan Wisdom Technology Co.Ltd(300066) ) has exceeded market expectations, and the replacement of mechanical water meters by industrial intelligent water meters has begun; Since 2020, the water informatization income of industry smart water companies represented by Zhejiang Heda Technology Co.Ltd(688296) , Wpg (Shanghai) Smart Water Public Co.Ltd(603956) has increased rapidly; In August 2021, the national development and Reform Commission and the Ministry of housing and urban rural development revised the measures for the administration of urban water supply prices and the measures for the supervision and review of urban water supply pricing costs, clearly incorporating the requirements of water informatization and intelligent water equipment, and the era of intelligent transformation of China’s water pipe network officially came.
On August 6, 2021, the national development and Reform Commission and the Ministry of housing and urban rural development revised and issued the measures for the administration of urban water supply prices and the measures for the supervision and examination of urban water supply pricing costs, which provided a policy basis for the rise of water prices. The increase of water price has greatly enriched the profit level of the water plant and provided funds for the intelligent transformation of the water pipe network: the new price system gives the water supply enterprises the allowable rate of return, which greatly promotes their capital expenditure on the informatization and intelligent transformation of water affairs. Taking Shanghai as an example, in 2020, the daily water supply volume of Shanghai municipal water supply enterprises will be about 7.94 million tons. If the water price increases by 0.5 yuan / ton on average, the annual profit will increase by about 1.5 billion yuan. During the 14th Five Year Plan period, Shanghai will accelerate the advanced treatment transformation of water plants, synchronously complete the renewal and transformation of 2000 km old water supply pipe network, strengthen the whole process water quality management of raw water, factory water, pipe network water and secondary water supply environment, and improve the drinking water quality of residents.
Profit forecast and investment rating: Based on the fact that the company is the leader in water informatization and several benchmark projects of water supply and drainage informatization have been implemented, we maintain the EPS of the company in 2021-2023 to be 1.11 yuan, 1.58 yuan and 2.32 yuan respectively, corresponding to 40, 28 and 19 times of PE, and maintain the “buy” rating.
Risk warning: the risk of national fiscal policy tightening beyond expectations; The risk that the intelligent transformation process of China’s water pipe network is less than expected; The risk of non recovery of the company’s accounts receivable, etc.
