Hongcheng Water Industry (600461) 2018 Annual Report Comments: Business volume growth boosts performance and benefits from rising water prices

Hongcheng Water Industry (600461) 2018 Annual Report Comments: Business volume growth boosts performance and benefits from rising water prices

Dynamic events The company released its 2018 annual report.

In 2018, the company realized operating income of 43.

US $ 7.7 billion, a year-on-year increase of 23.

52%; net profit attributable to shareholders of the listed company is 3.

3.6 billion yuan, an increase of 22 over the same period last year.

64%; net non-recurring profit or loss attributable to shareholders of the listed company is 3.

2.5 billion, an increase of 34 over the same period last year.

11%; basic return is 0.

43 yuan.

The profit distribution plan for 2018 is: cash distribution for every 10 shares1.

7 yuan (including tax).

Main points of view The growth of water and engineering business volume promotes performance improvement The company’s main business is water supply, sewage treatment, gas supply, engineering construction and other businesses.

In 2018, the company sold 346.75 million cubic meters of tap water, an increase of 8 over the previous year.

17%, the comprehensive qualified rate of factory water quality reached 100%; wastewater treatment capacity was 728.59 million cubic meters, an increase of 14.
.

45%; the natural gas supply is 372.86 million cubic meters, an increase of 17.
.

79%.

In 2018, the company achieved operating income of 43.

77 ppm, an increase of 23 in ten years.

52%; net profit attributable to shareholders of the listed company is 3.

3.6 billion, an annual increase of 22.

64%.

The increase in revenue and profit was mainly due to the increase in water sales, sewage treatment, gas sales and engineering business.

Of which: revenue from tap water business 6.

75 ppm, an increase of 10 years.

11%; income from sewage treatment business 7.

460,000 yuan, an increase of 25 in ten years.

40%; income from water supply and drainage engineering business 10.

900,000 yuan, an annual increase of 124.

26%; Gas sales revenue 11.

92 ppm, a decrease of 11 per year.

32%; revenue from gas engineering business 5.

73 trillion, an increase of 38 in ten years.

17%.

The faster growth was in the water supply and drainage engineering business, while the gas sales business declined.

The gross profit margin slightly increased the company’s overall gross profit margin to 24.

75%, an increase of 1.

65 units.

The company’s main business costs 32.
94 ppm, an increase of 20 per year.

86%; among them, the tap water business, sewage treatment business, gas sales, water supply and drainage engineering, gas engineering business, the cost increase was 7 respectively.

76%, 23.

29%, -11.

35%, 132.

37%, 34.

76%.

The gross profit margins were 40.

25%, 30.

43%, 4.

86%, 15.

62%, 56.

88%, an increase of 1.

86, 1.

19, 0.

04, -2.

94, 1.

09 averages.

The increase in water supply prices is conducive to the improvement of performance. According to the “Nanchang City Water Supply Price Adjustment Plan”, the Nanchang City Water Supply Price Adjustment Plan will be implemented from November 1, 2018.

Of which: the price of domestic water for first-level residents is 1.

58 yuan / ton, up 2.

03 yuan / ton, up by 0 per ton.

45 yuan, an increase of 28.

48%.

According to the preliminary calculation of the company’s water 南京夜网论坛 sales volume and accounting caliber in 2017, the company is expected to gradually increase the operating income of tap water by approximately 1 in 2019.

About 400 million.

The adjustment of water price is conducive to the conversion of the company’s tap water cost and will increase the company’s performance.

In May, the restricted shares will be lifted. On May 13, 2019, the company will have 19,559.

360,000 shares were lifted, accounting for 24 of the company’s total share capital.

77%.

The risk prompts industry policy risk, price risk, energy supply risk, etc.

Investment suggestion: Maintain a “cautious increase” rating for the next six months.

We forecast a 10-year return from 2019-2021 of zero.

47 yuan, 0.

52 yuan and 0.

55 yuan corresponds to a dynamic market surplus of 14.

0 times, 12.
8杭州桑拿论坛0 times and 11.

95 times, the company estimate is slightly lower than the industry average estimate.

In our opinion, the company’s tap water and gas business has regional advantages and rapid growth in business volume. The adjustment of water prices will enhance the company’s performance and maintain the company’s “cautious increase” rating.