Deeply cultivate the field of environmental monitoring equipment, and the products are oriented to environmental quality and pollution source monitoring. The company was established in May 1997, and entered the field of environmental monitoring equipment in June 65438+ 10 in 2002, and was successfully listed in 20 19. The company has been deeply involved in environmental monitoring technology for nearly 20 years and has outstanding competitive advantages in the field of water quality monitoring equipment market. At present, the company is an advanced environmental monitoring instrument manufacturer and monitoring system and operation service provider in China. The company's products are mainly used in two aspects: government departments and institutions with environmental monitoring needs, and pollution source enterprises under the key supervision of environmental protection departments.
Monitoring system+operation service are driven synchronously, and the gross profit margin remains high. The company's main business includes environmental monitoring system, operation service, software development and other main businesses, among which environmental monitoring system and operation service account for more than 90% of the total revenue in the past three years, which is the main driving force of the company's revenue. In 2020, the business income of environmental monitoring system will reach 460 million yuan (accounting for 59.4% of the total income), with a gross profit margin of 54.3%. In 2020, the operating service business realized an operating income of 264 million yuan (accounting for 34. 1% of the total revenue) with a gross profit margin of 44.0%.
The domestic water quality monitoring system has a leading market and a significant competitive advantage in the industry. The company's environmental monitoring business mainly focuses on water quality monitoring. According to the statistics of China environmental monitoring equipment market and monitoring system sales by China National Environmental Monitoring Center, the company's market share in water quality monitoring system is 2012011.50%/8.26% respectively. At the same time, relying on advanced water quality monitoring technology and years of experience, the company also has strong technical advantages in the field of online monitoring equipment for pollution sources.
(2) Equity incentives constrain core employees, and the assessment of revenue growth rate highlights the confidence of enterprise development.
The controlling shareholder and actual controller of the Company is Mr. Zhang Guangsheng. By the end of September, Mr. Zhang Guangsheng directly held 39.26% of the company's shares. Zhang Guangsheng, the chairman of the company, has a technical background. According to the prospectus, Zhang Guangsheng graduated from Central South University majoring in geological exploration and founded Hunan Lihe Technology Development Co., Ltd. on 1997. He used to be the director and general manager of the company. At present, he is the executive director of China Environmental Protection Industry Association and the vice president of Hunan Environmental Protection Industry Association. He won the 20 17 National Science and Technology Progress Award of the State Council for the project "Key Technology and Application of Groundwater Pollution Prevention System in Landfill Sites".
Actively promote equity incentives and release the company's endogenous motivation. On September 24th, 20021year, the company reviewed and approved the restricted stock incentive plan, and granted 3.2 million restricted shares to the company's middle managers, core technical (business) personnel and loyal employees (* * * 135), accounting for 1.34% of the total share capital before the grant, and the grant price was/kloc. At the same time, the incentive plan will set 202 1 and 2022 as assessment years, with the operating income of 774 million yuan in 2020 as the base and the income growth rate of not less than 15% and 32% as the assessment targets respectively, and the restricted shares will be lifted in two years. Corporate equity incentives bind the interests of core employees, which is helpful to further improve the governance structure and stimulate employees' endogenous motivation.
(3) The release of orders will drive the growth of performance, and the expansion of abundant monetary funds with low debt can be expected.
Order-driven performance growth, 2065 438-2020 revenue/performance compound growth rate of 30%/49%. Thanks to the continuous strengthening of the state's efforts to manage the living environment, the demand for environmental monitoring market continues to be strong, and the compound growth rate of the company's income and performance from 2065 to 438 to 2020 will reach 30% and 49% respectively. Among them, 282 million "National Surface Water Automatic Monitoring System Construction and Operation and Maintenance Project" won the bid in 2065438+2008, which greatly increased the current income. The monitoring industry order release method is linked to the assessment node with a five-year cycle. It is expected that with the release of the "14 th Five-Year Plan" order, the company is expected to resume rapid growth. 202 1 In the first three quarters, the company's revenue increased 1 1.34%, and the net profit attributable to the mother increased 1.04%. The income growth rate gradually picked up, and the lower performance growth rate was mainly caused by the decrease of gross profit margin of the newly signed contract of 202/kloc-0 and the lifting of the epidemic situation.
The company's cash flow is in good condition and the project support ability is profound. In the past five years, the net cash flow generated by the company's operating activities was of good quality and showed an overall growth trend. In 20 19, due to the payment factor of the previous year's project, the net cash flow from operating activities rose sharply to 257 million yuan. In the first three quarters of this year, the net cash flow from operating activities was negative, mainly due to the increase in cash for purchasing goods and services, but the order-making ability was strong, and the return in the second half of the year was concentrated, so the net cash flow was more stable than the whole. In addition, the company's cash income and operating income match well, and the cash received from selling goods and providing services continues to increase, reaching 796 million yuan in 2020, and the cash receipt and payment ratio remains above 65,438+0.
Sufficient monetary funds guarantee the subsequent expansion, and IPO optimizes the company's asset-liability ratio. The company's asset structure is mainly monetary funds. In 2020, the monetary fund in hand reached 543 million yuan, accounting for 23.4% of the total assets. Adequate monetary funds are conducive to ensuring the company's subsequent capacity expansion. The debt structure is mainly accounts payable and accounts received in advance. At the same time, the company maintained zero short-term/long-term loans, showing the company's sound fund arrangement measures and efficient management system. Benefiting from the company's good debt structure and IPO raised funds, the company's asset-liability ratio dropped significantly in 20 19. By the end of the third quarter of 2002/kloc-0, the company's asset-liability ratio was only 13%.
Second, research and development, order-driven growth, opening up new markets for third-party testing (1) The monitoring profit model is order-driven, and the repayment risk of downstream customers is small.
Products and services cover a wide range, and equipment+operation consolidate profit points in multiple dimensions. The company's main products and services can be divided into water quality monitoring system, air/smoke monitoring system, software development and operation services. In the field of water quality monitoring, online water quality monitoring system is the main part, which consists of online water quality analyzer, system control base station, water sample collection and pretreatment unit and other corresponding supporting equipment. In the field of gas monitoring, the monitoring instruments manufactured by the company can monitor various monitoring factors in the atmosphere/flue gas in real time. The company's environmental monitoring business not only sells monitoring instruments, but also needs system integration, installation and debugging on site. In addition, operation service refers to the professional maintenance and operation management of environmental online monitoring system entrusted by environmental protection, water conservancy, municipal administration and other departments or pollution source enterprises, and collects operation service fees in the process.
The company mainly obtains business through bidding and business negotiation, and the proportion of bidding accounts for about 60%. According to the prospectus, in the first half of 20 19, the business income of the company's bidding project was 240 million yuan, accounting for 66.2% of the total income. The customers who sell products through bidding are mainly government departments or institutions such as environmental protection, municipal administration and water conservancy. In addition, for the pollution source enterprise customers, because their environmental monitoring equipment needs to pass the acceptance of the local environmental protection department after purchase and installation, the company generally needs to conduct business negotiations and sign contracts with the pollution source enterprise customers after bidding selection or qualification examination organized by the local environmental protection department.
The aging of accounts receivable is mainly within two years, and the customer structure ensures the stability of payment. Due to the sales model and business expansion of the company's products, the scale of accounts receivable has increased. Environmental monitoring equipment needs to go through installation, debugging, acceptance and warranty period, and the product sales contract period is long, which makes the repayment period of some contract funds longer. Judging from the aging structure, the aging of the company's accounts receivable is mainly within two years. According to the prospectus, the top five accounts receivable customers of the company are mainly government departments and institutions, with high credit rating and guaranteed sales return.
(2) R&D advantage creates a moat, and the increase in production capacity helps the growth of orders.
The company's R&D investment has increased steadily, and the research results of water quality monitoring technology have been fruitful. Thanks to the company's perfect technological innovation and talent training mechanism, the company's R&D investment has been increasing. In the past five years, R&D investment accounted for 7% of revenue. In 2020, R&D expenditure reached 52 million yuan, accounting for 6.69% of total operating income. The scale of the company's R&D personnel is also expanding. Except that the total number of employees in 20 18 increased significantly due to the expansion of the company's scale, the proportion of R&D personnel in the total number of employees kept increasing for three consecutive years, and in 2020, the proportion of R&D personnel in the company was 13.2%. By the end of June, 20021year, the company had 240 patents, including 77 invention patents, 49 utility models, 4 designs and 57 software copyrights. In addition, the company attaches great importance to technical research and construction, and actively participates in major national, provincial and ministerial scientific research projects. According to the prospectus, the company participated in 65,438+06 projects as the undertaker.
In 20 18, it won the bid for the national surface water list, which showed the outstanding competitiveness of the company in the field of water quality monitoring. The company's continuous deep cultivation and R&D investment in the field of environmental monitoring have won industry recognition. 2065438+May 2008, the company successfully won the bid for the fifth package, the ninth package and the 19 package under the "National Surface Water Automatic System Construction and Operation and Maintenance Project" of China Environmental Monitoring Center, with a bid amount of 282 million yuan, accounting for 17.85 of the total bid amount. In addition, the company passed the technical test of China National Environmental Monitoring Center and was selected as the project equipment supplier, providing equipment procurement for Xiamen Longlide, Shanghai Coetzee and Changjiang Academy of Sciences, with a contract amount of 654.38+70 billion yuan. The direct and indirect winning orders of the project company are 452 million yuan, which shows the competitiveness of the company.
(three) to expand the third-party testing service market, optimize the business model, improve the profit rate.
Relying on the advantages of R&D, start the reform of business model and open up the third-party testing service market. The quarterly report of 200213 shows that, relying on technological innovation, the company has continuously promoted the optimization and customization of intelligent control terminals and complete sets of intelligent water quality detection equipment in non-contact laboratories on the basis of the previous generation detection mode, broke through a number of automatic monitoring technologies, and took the lead in realizing the automatic monitoring of more than 100 water quality indicators, laying intelligent water quality detection lines in non-contact laboratories in subsidiaries in Beijing, Wuhan and other places. The daily analysis capacity of a single detection line exceeds 500 samples, and the water quality automatic monitoring system independently developed by the company also won the first prize of 202 1 Environmental Technology Progress Award. Relying on this intelligent water quality testing system, the company provides daily water quality testing services for the government and the company, and charges according to the number of tests, which opens up the market demand for third-party testing services.
Business model of testing industry: abundant cash flow is generated during laboratory operation to feed back investment expenditure, and the profitability is more prominent under anti-cyclicality. Compared with equipment sales and service providers, testing enterprises have strong bargaining power for upstream and downstream, and have high operating leverage and scale effect. After entering the operation period, the laboratory can generate abundant cash flow returns (the net cash flow ratio is above 1.5). On this basis, some leverage (the leverage ratio of the industry is below 30%) can meet the investment needs of enterprises in the period of rapid expansion. In addition, because laboratories in different industries can independently develop and produce some instruments and equipment, there can be a synergistic effect between equipment research and development and laboratory testing services to maximize the overall efficiency. Taking water quality testing as an example, according to the General Guidelines for Self-monitoring of Pollutant Discharge Units and the detailed rules of various industry standards, under the strong policy requirements, it is more countercyclical to require key pollutant discharge enterprises to carry out daily frequency testing and other enterprises to carry out weekly and monthly testing and declaration according to the standard requirements.
Third, the 14th Five-Year Plan has arrived, and third-party testing has opened the ceiling of growth. (1) The construction of environmental monitoring was accelerated during the "Tenth Five-Year Plan" period, and the sectors driven by tax collection and sewage tax continued to benefit.
The construction of environmental monitoring is accelerating, and the corresponding market demand is constantly accelerating. From August, 2065438 to August, 2005, the State Council issued the Construction Plan of Ecological Environment Monitoring Network, which laid the foundation for the accelerated development of intelligent monitoring, and emphasized the improvement of monitoring network layout and data quality. During the "Thirteenth Five-Year Plan" period, the construction of environmental monitoring has been accelerating. According to the Outline of Eco-environmental Monitoring Planning (2020-2035), by 20 19, more than 5,000 urban air quality automatic monitoring stations,1/00 surface water monitoring sections and about 80,000 soil environment and radiation monitoring stations will be built nationwide. In terms of environmental quality monitoring, the expansion of state-controlled and provincial-controlled points and the upgrading of original equipment bring market demand; In the aspect of pollution source monitoring, the introduction of environmental tax is expected to promote the automatic monitoring equipment rate of enterprises; Change local power, strengthen supervision, ensure the quality of monitoring data, and accelerate the efficiency of monitoring departments.
Existing equipment is facing upgrading, and the number of environmental monitoring points continues to expand during the "Tenth Five-Year Plan" period. According to the 20 19 ecological environment statistical annual report of China, there are 8688 monitoring points of ambient air, 79079 monitoring points of surface water quality1319 and 79079 monitoring points of environmental noise in China, and 40272 key enterprises have carried out supervisory monitoring of pollution sources. According to the requirements of relevant technical specifications, the service life of environmental quality monitoring equipment generally does not exceed 8 years, and the original point equipment will be upgraded one after another during the "14 th Five-Year Plan" period. In addition, in 2020, the Ministry of Ecology and Environment issued the "14th Five-Year Plan" national air and surface water environmental quality detection network setting scheme, adding 3 13 atmospheric points and canceling15 on the basis of the original 1.436; On the basis of the original 2050 water quality points, 1642 points were added and 46 points were deleted. Coupled with the encryption of provincial control points, the corresponding equipment update and point expansion will be beneficial to the sales of monitoring board equipment.
(II) The overall market space of environmental monitoring equipment reached 45.7 billion yuan, corresponding to the operation and maintenance space13.6 billion yuan/year.
According to the classification of monitoring objects, the environmental monitoring industry can be divided into environmental quality monitoring and pollution source monitoring, and the market space can be divided into two categories: equipment sales and operation space. Spatial measurement of environmental monitoring industry based on classification. According to the calculation, the sales market space of environmental monitoring equipment in China reached 45.657 billion yuan during the Tenth Five-Year Plan period, and the corresponding operation and maintenance market scale was 65.438+03.632 billion yuan/year. Core assumptions of spatial measurement for environmental quality monitoring;
(2) Assumption of average price: referring to the state-controlled bidding documents and the information of the government bidding network, it is assumed that the unit price of environmental quality monitoring point equipment is estimated according to 6.5438+0.5 million yuan/national, provincial and municipal control points (air), 800,000 yuan/other points (air), 700,000 yuan/national control points (water quality) and 500,000 yuan/non-national control points (water quality).
(3) Assumption of the renewal rate of environmental quality equipment: the bidding for national control points will be completed on 20 18. According to the prospectus, the service life of environmental monitoring system is 5-8 years. Considering the high loss rate of surface water monitoring system, it is assumed that the update rate of atmospheric environmental quality monitoring points is 60% and that of surface water quality monitoring points is 80% during the Tenth Five-Year Plan period.
(4) Annual operation and maintenance cost of a unit point: refer to the price shown in the tender documents of national control points, assuming that the control points of atmospheric countries, provinces and cities are 250,000 yuan/unit, and the operation cost of other (township) points is 6,543,800 yuan+5,000 yuan/unit. The operating cost of national, provincial and municipal control points for surface water is 200,000 yuan/unit, and other (township) points are 65,438+10,000 yuan/unit.
Core assumptions of spatial measurement for pollution source monitoring;
(1) Estimation of monitoring quantity of pollution sources: it is divided into national key monitoring enterprises and non-national key monitoring enterprises. According to statistics, there were 3,778 industrial enterprises above designated size in 20 19 years, and the number of key monitoring enterprises was estimated to be 10%. According to the 20 19 annual report of China's ecological environment statistics, there are 238 key monitoring enterprises and 40,272 enterprises carrying out automatic monitoring of pollution sources.
(2) Assumption of the new rate of pollution source equipment: Considering that the service life of the equipment is 5-8 years, the new rate of pollution source equipment at other points is assumed to be15%, except that automatic monitoring of non-national key monitoring has not been implemented;
(3) Average price assumption: According to the unit purchase price of pollution source equipment disclosed in the prospectus, it is estimated that each national key monitoring enterprise will be equipped with 5 sets and non-national key monitoring enterprises will be equipped with 3 sets; Operation and maintenance costs: The national key monitoring enterprises and non-national key monitoring enterprises are estimated according to the average annual rate of 65,438+10,000 yuan/enterprise and 80,000 yuan/enterprise respectively.
(3) New demand: the policy began to strengthen water quality supervision, and the demand for third-party testing accelerated.
202 1 March1day, the implementation of "Regulations on the Management of Pollution Discharge Permit" opened up the demand for third-party testing of fixed emission sources. The regulations clearly require that pollutant discharge units should apply for pollutant discharge permits as required; No pollutant shall be discharged without obtaining a pollutant discharge permit. The pollutant discharge unit that has obtained the pollutant discharge permit must carry out self-monitoring according to the specifications or entrust other inspection (supervision) and metering institutions to carry out self-monitoring on its behalf; Among them, the pollutant discharge units that implement the key management of pollutant discharge permits shall install, use and maintain automatic monitoring equipment for pollutant discharge according to law, and connect with the monitoring equipment of the competent department. On the one hand, installing on-line monitoring equipment in key management sewage units meets the company's traditional business needs; On the other hand, it is more economical to adopt flexible and convenient third-party testing services for sewage units with simplified management, and the related demand is accelerating.
There is a vast space for third-party water quality testing, and the corresponding market scale can reach 45-60 billion yuan/year. The Outline of Ecological Environment Monitoring Planning (2020-2035) proposes to study and establish a surface water monitoring and evaluation mechanism based on automatic monitoring. A large number of points that originally relied on manual monitoring will switch to automatic monitoring as long as conditions permit. According to the second national pollution source survey bulletin issued in June 2020, by the end of 20 17, there were 3.58 million fixed emission sources in China, including more than 20 water pollution outlets 120, of which only 10% was equipped with online monitoring equipment. According to the latest pollution discharge permit management regulations this year, the remaining 90% (about 1 10,000) needs to be monitored by itself or entrusted by other monitoring institutions. At present, the unit price of third-party operation and maintenance is about 654.38+0.50 ~ 200 yuan/time, and the monitoring frequency is daily, so the potential demand for third-party testing can reach 45 ~ 60 billion yuan/year.
The company has taken the lead in testing the market layout by the third party, which has more "breaking" potential under the condition of "high income+low debt". The company's five-year history has witnessed a compound growth rate of 30.4%, and the net interest rate has been rising year by year, rising to 33.7% in 2020, and its profitability has been continuously enhanced. Affected by the expansion of IPO assets, the ROE level has declined, but it still maintains the best level in the industry. At the same time, the company's asset-liability ratio has an obvious downward trend, and it will only be 65,438+09.0% in 2020. High profitability is accompanied by low debt level. By the end of 20021Q3, the company's monetary funds and trading financial assets reached13.2 billion yuan, and sufficient ammunition made the company more "broken".
Fourth, water quality monitoring leader, third-party testing to promote high growth. We divide the company's business into environmental monitoring system, operation service, software development and other businesses, and make core assumptions to calculate the income and cost scale in the next three years:
Environmental monitoring system: With the continuous release of the demand for the new round of monitoring equipment procurement in the 14th Five-Year Plan, we predict that the sales volume of the company's instrument products will increase by 20%, 30% and 30% respectively from 2026 to 2023, and the average sales unit price will be 65,438+00.00, 65,438+00.20 and 65,438+004,000 yuan. It is predicted that the gross profit rate from 2002/kloc-0 to 2023 will be 50.0%, 50.5% and 5 1.0% respectively, and the income growth rate of environmental monitoring system from 2002/kloc-0 to 2023 will be 19.26%, 32.60% and 32.55 respectively. Operation service: It is expected that with the spread of monitoring equipment sales, supporting operations are expected to achieve year-on-year growth. It is predicted that the revenue growth rate of operation service 202 1 will be 20%, 20% and 20% from 2023, and the gross profit rate will be 44%, 44% and 44%. Software development: It is estimated that the revenue growth rate from 2002/kloc-0 to 2023 will be 10%, 10% and 10% respectively. According to the historical gross profit margin, it is predicted that the gross profit margin will be 50%, 50% and 50% from 2002 to 2023. Other businesses: It is estimated that the revenue growth rate from 2002/kloc-0 to 2023 will be 10%, 10% and 10% respectively. According to the historical gross profit margin, it is predicted that the gross profit margin will be 20%, 20% and 20% from 2002 to 2023.
Profit forecast and investment analysis: Relying on the release of traditional equipment and third-party inspection orders during the 14th Five-Year Plan, the company is expected to return to the high growth track. It is estimated that the net profit returned to the mother by 2023 will be 263.49 million yuan and 454 million yuan respectively, corresponding to the latest PE valuation of 2 1. 16.6 and 12.7 times respectively. Considering the expansion of emerging businesses such as concentration technology and the fluctuation of valuation level, it is not comparable. Therefore, we give the company a valuation based on PEG. It is estimated that the company's performance growth rate will reach 30% in 2022 and 2023, and it is still expected to maintain high growth in the long run.
(This article is for reference only and does not represent any of our investment suggestions. See the original report for information. )