First Capital (600008) Company In-depth Report: Spring Turnover Results

First Capital (600008) Company In-depth Report: Spring Turnover Results
Company profile: Water and solid waste dual-main business, a state-owned environmental protection listed company affiliated to Beijing Capital Group.The company is a state-controlled environmental protection enterprise affiliated to Beijing Capital Group. Beijing State-owned Assets Supervision and Administration Commission is the actual controller of the company. As of the end of September 2019, Capital Group held 46% of the shares.In the company’s revenue structure in 2018, wastewater treatment, tap water production and sales, environmental protection construction, garbage disposal revenue, highway tolls, and heating revenue accounted for 16%, 13%, 40%, 28%, 3%, and 0, respectively.1%.Corresponding gross profit margins are 31%, 24%, 28%, 32%, 62% and 6%. Industry analysis: The water industry has increased steadily, and the proportion of waste incineration has increased rapidly. Tap water supply industry: Urban water penetration rate was 98 in 18 years.36%, the increase in urbanization rate has promoted the industry’s steady increase.China’s highest total water consumption has remained stable overall, with a CAGR of -0 in the past five years.3%.The initial rural water penetration rate and urbanization rate continued to increase, and the urban and county water use rate reached 98 in 18 years.36% and 93.80%, there is still room for improvement in the township and village water supply rate. As the urbanization rate and water penetration rate continue to increase, domestic water consumption has also steadily increased, with a CAGR of 2 in the past 5 years.91%.It is expected that there will be 2 every year.The 8.6 billion urban population has room to rise and will increase urban water consumption by 51.4 billion cubic meters per year.The amount of urban water supply and the comprehensive production capacity of water supply have been increasing steadily, and the CAGR has reached 3 in the past 5 years.0% and 2.2%.Urban water prices are adjusted regularly, with the average water price of 36 urban residents reaching 2 in 19 years.28 yuan / ton, with a compound growth rate of 2 in the past 10 years.4%. Sewage treatment industry: CAGR 6 for urban sewage treatment in 12-17 years.06%, the processing rate still has room for improvement.The 13th Five-Year Plan requires that by the end of 2020, the urban sewage treatment rate will reach 95% and the county sewage treatment rate will reach 85%.In 2017, the sewage treatment rate in cities and counties reached 94.54%, 91.16%.The increase in sewage demand has led to the rapid development of the sewage treatment industry, and the CAGR of the sewage treatment volume and output reached 6 to 12 to 17 years.06% and 6.25%.The length of urban sewage pipelines and the number of sewage plants have increased rapidly, and CAGR reached 7 in 12 years.5% and 10%.The current 36 urban sewage treatment fees have been increasing steadily over the past 15 years, and the latest treatment fees in 19 reached zero.98 yuan / ton, a compound growth rate of 3 over the past 10 years.0%.Guided by policies such as sponge cities and underground pipe corridors, the sewage treatment industry will shift from separate sewage treatment to comprehensive water environment treatment. Solid waste treatment industry: The proportion of waste incineration has increased rapidly.At present, the solid waste disposal methods mainly include sanitary landfill, direct incineration, incineration power generation, and comprehensive treatment of multiple methods.The volume of domestic garbage 四川耍耍网 removal in China has steadily increased, with a CAGR of 5 in 12-18.75%; 18 years of harmless treatment rate reached 98.96%.In 17 years, sanitary landfills and incineration accounted for 57% and 40% of the total volume of harmless treatment of urban life nationwide.Waste incineration accounted for 24 from 5 years ago.7% rose to 40.2%.The “Thirteenth Five-Year Plan” National Urban Harmless Waste Urbanization Design Plan requires that the waste incineration capacity accounts for more than 50%, and the eastern region reaches more than 60%. Water business has developed rapidly, with revenue growth of 21 in the first half of the year.49%, sufficient orders in hand.The company’s water product line business mainly includes tap water supply, sewage treatment, and water construction. The water service business has a CAGR of 20% in 2014 and the gross profit margin is stable during the period.The company mainly expands its power supply business by establishing water supply companies with local enterprises and acquiring equity in local water supply enterprises.1) The revenue of water supply business maintained rapid growth: the company’s water supply business income in the first half of 199.20,000 yuan, an annual increase of 25.1%, the gross profit margin of the water supply business for 18 years was 24.1%.In the first half of 19, Chengdu Jinqiang, Tianjin Ninghe, Hebei Huaguan and other projects were put into production and the water price of some existing projects rose, so the company also provided a rapid increase in operating income.The company’s water business revenue has steadily increased since 14 years, and the CAGR of revenue from 14 to 18 has reached 20.0%.The company’s water business gross profit margin is relatively stable, with an average gross profit margin of 24 in the past five years.9%.2) The company’s 18-year tap water supply capacity reached 1402.On the 9th day / day, the production-sales margin is 15.1%, capacity utilization rate is 61.9%.The company’s tap water supply capacity has grown steadily in the past three years, with a compound growth rate of 14 in the past three years.1%.The gradual reduction of the production-sales gap will help the company improve efficiency.The company’s maximum production capacity has not been high, because the number of permanent residents in the cities where some factories are located has not yet reached the planned target, resulting in insufficient demand for elongation.In the future, with increasing population growth and increasing urbanization rate, the urban population will continue to increase, and the company’s tap water supply capacity will be promoted.3) Water prices are gradually raised, and bargaining power is supplemented.The company’s tap water price has different pricing in various regions. In 18 years, the average water price in North China, East China, Central South, and Southwest China was 2 respectively.17 yuan / cubic meter, 2.06 yuan / cubic meter, 2.08 yuan / cubic meter, 1.81 yuan cubic meters.The average water prices of the company’s domestic water, non-residential water and other customers are 1.89 yuan / cubic meter, 2.73 yuan / cubic meter and 1.63 yuan / cubic meter.The company’s bargaining power is expected to increase water prices for four water supply projects in 2018. The CAGR of wastewater treatment revenue in the past 4 years reached 23.8%, gross profit margin and unit processing price are above average.1) The company’s sewage treatment business income in the first half of 1912.0 million yuan, an increase of 34 in ten years.8%, gross profit margin of sewage treatment business in 2018 is 31.2%.In the first half of the year, the company’s Yuyao Wastewater Project, Hefei Shilili River Wastewater Project was put into operation, and the water price of some existing projects rose, which caused the company’s wastewater treatment business revenue to increase rapidly.The company’s water business revenue has steadily increased since 15 years, and its compound growth rate from 15 to 18 years has reached 23.8%.The gross profit margin of the company’s wastewater treatment business has been declining, with an average gross profit margin of 38 in the past five years.1% with a standard deviation of 5.4%.2) The company’s 18-year sewage treatment capacity reached 1226.The daily output of 0 days, the capacity utilization rate is 85%.The company’s wastewater treatment capacity has grown steadily in the past three years, with a compound growth rate of 16 in the past three years.1%.The maximum sewage treatment capacity has remained relatively stable, with an average capacity utilization rate of 83 in the past three years.3%.In the future, the population growth and urbanization rate will increase, the urban population will continue to increase, and the company’s sewage treatment capacity is expected to continue to increase.3) The price of the company’s sewage treatment varies in different regions, and the average national price is 1.07 yuan / cubic meter.The company’s sewage treatment pricing principle is based on the franchise agreement and the actual situation, and the price adjustment mechanism is implemented according to the agreed agreement, which is usually adjusted once every two years, and a guaranteed minimum water volume is also agreed on the treatment scale, so the business profitability can maintain a high level.4) The company’s traditional water business has sufficient reserves for its existing projects, and its subsequent performance growth can be expected.As of the end of 2018, the company’s tap water supply and wastewater treatment capacity reached 1,402 respectively.92, 1,226.00 a day / day; capacity under construction 413.65 day / day, expected in 2019?Production will start in 2021.As of the end of the third quarter of 2019, the company’s balance sheet had a construction surplus of 182.USD 600 million, which is 59% of the balance of fixed assets + intangible assets, and the reserve of projects under construction is redundant. Revenue from water construction business over the past five years has reached a CAGR of 77.9%, sewage pipe network construction and sponge cities are expected to become the future growth point of performance.The company has dozens of water plant engineering construction experience, and its subordinate engineering companies have multiple engineering professional qualifications, including first-level general contracting for municipal public works construction, first-level general contracting for construction engineering, and municipal public works (water supply and drainage for engineering consulting units).) Class A qualifications, etc.1) The company’s water construction business income in the first half of 19th.0 million yuan, an increase of 10 in ten years.2%, gross profit margin of sewage treatment business in 2018 was 27.6%.In the first half of 19, the company’s Changshu project operated stably. Fuzhou, Guyuan, Sanya, Shunyi, Lintong and other projects will gradually enter the operation phase (partial operation) in batches.In addition, the company’s sludge business has grown rapidly, and green resource projects such as urban green heating, water source heat pump system heating, and water reuse have continued to advance.These factors led the company’s water business construction revenue growth in the first half.The company’s water construction business revenue has grown rapidly since 14 years, and the compound growth rate of revenue from 14 to 18 years has reached 77.9%.The gross profit margin of the company’s water construction business has remained at 27% in the past two years, which is relatively stable, and it has remained at this level with a high probability in 19 years.2) The total investment of important projects under construction in the first half of 19 was 167.600 million, including 5 important projects under construction, with a total investment budget of 90.200000000.In the first three quarters of 19, there was a surplus of 182 under construction.600 million in the third quarter of a single quarter of construction in progress increased by 2.5 billion. In the first half of 19, revenue from solid waste business increased by 30%. Kitchen waste and incineration power generation promoted accelerated development. 1) The company’s solid waste business is mainly divided into two parts, domestic and overseas.As of the first half of 19, the company’s internal solid waste treatment projects have entered a total of 45 construction and operation periods.The company’s internal solid waste business subsidiary pioneered a total of 72 domestic projects in the environment. The types of projects cover waste incineration power generation, landfill, anaerobic treatment, garbage collection and storage, comprehensive treatment of hazardous waste, dismantling of waste electrical appliances and biomass power generationThe total investment is about 18.7 billion yuan, and the total design scale is about 1,599 millimeters of annual domestic waste disposal, and about 3.2 million pieces of electronics and electrical appliances are dismantled every year.The overseas solid waste business is mainly based on BCG NZ, a New Zealand company acquired by Hong Kong and Singapore’s ECO.2) The company’s waste treatment business income in the first half of 1920.20,000 yuan, an annual increase of 30.1%, gross profit margin of solid waste treatment business in 2018 was 32.4%.After the company’s solid waste business acquired the BCG NZ company in 2015, business revenue has grown rapidly and stabilized at more than 3 billion. At the same time, the gross profit margin has been relatively stable, and it has remained above 30% for 15 years.Benefiting from the waste classification policy, the company’s kitchen waste anaerobic digestion project maximized its production capacity.In the first three quarters of 19, the company’s food and kitchen waste treatment projects in Hangzhou and Yangzhou have basically reached full capacity.With the full implementation of the garbage classification policy in 46 pilot cities in 2020, the amount of food and kitchen waste disposal is expected to increase rapidly in the future.3) The company’s overseas solid waste business is relatively mature and stable, with overseas revenue in 201826.1 ppm, a ten-year increase of 2.6%, gross margin reached 32.2%.As the New Zealand solid waste market matures, overseas business revenue has remained stable and alive.CAGR of operating income from 15 to 18 years is 8%, with an average gross margin of 33%.Since 16 years, the company has provided stable gross profit of more than 800 million yuan.4) The company’s solid waste business mainly deals with domestic waste (including kitchen waste). The income from domestic waste treatment in 2018 was 27.4 trillion, accounting for 21 of total revenue.97%, gross margin is 32.12%.The gross profit margins of the company’s three waste treatment types are roughly the same.The domestic and overseas domestic garbage disposal volume in 18 years was roughly 2: 1.5) In the first three quarters of 19, the company’s waste-to-energy business gradually completed an amount of 279.97 million kWh of on-grid electricity, which later increased by 33.89%.Among them, the growth rate of power generation in Guizhou Province accelerated to 362.11%.At the same time, it is beneficial to reduce taxes and cut taxes.14%.In the third quarter, the company’s waste power generation business had a total revenue of 47.24 million yuan, which will increase by 18.63%.The company actively develops waste power generation business. In 19 years, it signed a number of incineration power generation projects with a total design scale of 3550 tons / day.The waste incineration power generation business has huge market space and is expected to become a new growth point for the company’s performance in the future. Give full play to the advantages of financing, the nationwide layout, leading growth rate. The financing cost budget has significant capital advantages.1) The company’s financing cost in 2018 was 4.3%, while the average financing cost of comparable listed companies is 5.1%.Since 2018, due to the deleveraging policy, many environmental protection companies have experienced tight funding chains, and some debt default problems have occurred.Some private enterprises have dated state-owned strategic shareholders, Oriental Garden, and Huaneng Technology also transferred control.As a holding company of Beijing SASAC, the company’s financing capacity is supplemented by a financing cost of 4 in 2018.3%, while the average financing cost of comparable listed companies is 5.1%.Here the 2018 financing cost = (interest expense + interest capitalization amount) / annual average value of interest-bearing debt; annual average value of interest-bearing liabilities = short-term expenditure of each quarter in 2018, non-current liabilities due within one year, other current liabilities, Long-term borrowings, expectation of the sum of payable bonds.2) In 2019, the size of corporate bond issuance increased by 72% to US $ 11.7 billion, reducing the average interest rate from 4.5% dropped to 4.1%.2016?In 2019, the scale of corporate bond issuance was 40, 25, 68, and 117 trillion US dollars, and the average incremental interest rates were 3.2%, 4.8%, 4.5%, 4.1%. In May 2019, the company announced a rights issue plan, placing 3 shares for every 10 shares and raising no more than 5.3 billion yuan.Placement to all shareholders at the rate of 3 shares for every 10 shares.The price of the rights issue is based on the average price of the company’s stock trading 20 trading days before the announcement of the issue. The market price discount method is used to determine the rights issue price.The size of the funds raised from the rights issue will not exceed RMB 5.3 billion. After deducting the issuance expenses, the funds will be used to supplement the company’s working capital and repay bank loans. The company’s business has spread across the country, and the compound growth rate of water business revenue from 13 to 18 years has reached 23.5%, among the best in comparable companies.Compared with similar state-owned enterprises, the company has a strong ability to take projects, covers a large number of provinces and cities, and has a rapid compound growth in water revenue. The revenue growth rate is second only to Zhongyuan Environmental Protection, which completed the asset acquisition in 2016. Earnings forecast and estimation level: The first recommendation rating is given. Accelerated share capital expansion has accelerated since 2017, revenue growth has accelerated since 2018, and profit growth has accelerated since 2019.Water affairs and solid waste operating assets are mostly implemented in the BOT mode, and the initial investment of the project is breakthrough.The company’s capital expenditure has accelerated since 2017, and the net cash replacement of investment activities has increased from 38 in 2016.900 million to 70.200 million; In 2018, with the initial investment projects put into operation, revenue growth rose to 34.1%; In 2019, with the initial production projects gradually reaching production, the growth rate of net profit attributable to mothers accelerated to 31.8%. Judging from comparable companies’ estimates, the first capital stock 2019?PE and PB will be 17 in 2020.8, 14.9, 1.55 times.The performance of Capital Group has increased rapidly, and the net profit attributable to mothers in the first three quarters of 2019 has further increased by 31.8%, comparable company’s growth rate was -8.9%.The current valuation of Capital Group is higher than that of comparable companies, and the median PE of comparable companies in 2019 is 14.5 times. Investment suggestion: Maintain the recommended level for high-quality water and environmental protection targets.Expected company 2019?EPS will reach 0 in 2021.17 yuan, 0.20 yuan, 0.24 yuan, corresponding to 18 times, 15 times, 12 times the price-earnings ratio.The company’s current market net interest rate is 1.55 times.As the environmental protection projects invested in earlier stages have been put into production, the company’s performance growth has maintained rapid growth.The company has outstanding financing advantages, a nationwide business layout, and a preliminary growth in performance. Risk reminder: Project advancement fails to meet expectations; project operation efficiency fails to meet expectations; policy risks