Jiangnan Water (601199): Municipal Water Affairs Platform of Jiangyin State-owned Assets Supervision and Administration Commission: Performance evolution comes from the stability of engineering water production capacity

Jiangnan Water (601199): Municipal Water Affairs Platform of Jiangyin State-owned Assets Supervision and Administration Commission: Performance evolution comes from the stability of engineering water production capacity

This report reads: Jiangnan Water is a municipal water platform affiliated to Jiangyin State-owned Assets Supervision and Administration Commission, and its respective supply and wastewater treatment capacity has remained stable for the past five years. The engineering sector is the main source of performance changes. The commissioning of the Qin Wangshan hazardous waste project in 2019 will boost performance.

Investment points: Investment advice: The company is expected to have a net profit of 2 in 2019-2021.

2.5 billion, 2.

4.5 billion and 2.

55 ppm, corresponding EPS is 0.

24, 0.

26 and 0.

27 yuan / share, with reference to the industry’s average estimated level, and considering the company’s engineering sector performance elasticity breakthrough, the company is given 16 times PE in 2019 with a target price of 3.

84 yuan / share, the first coverage, given a neutral rating.

Jiangyin City SASAC’s water affairs platform: The company’s first and second largest shareholders are Jiangyin Urban and Rural Water Supply and Drainage Co., Ltd. and Jiangyin Common Assets Management Co., Ltd., the wholly-owned enterprises affiliated to Jiangyin State-owned Assets Supervision and Administration Commission, and listed companies.year old

19% and 23.

18%.

The performance mainly comes from the engineering service sector: The company, as a water management platform affiliated 北京夜生活网 to the Jiangyin State-owned Assets Supervision and Administration Commission, has three sources of performance: ① Supply: The company’s production capacity has remained at 116 tons / day in the past 5 years (Xiaowan 30wt / d, Xiaoshan 60 wt / d, Chengxi 20 wt / d and Ligang 6 wt / d), the changes in revenue and profit contribution are small.

② Engineering installation: The company has the second-level qualification for general contracting of municipal engineering construction, which mainly involves engineering services such as pipe networks and secondary water supply, and is the main source of changes in the company’s performance.

③ Sewage disposal: the company’s capacity increase in the past 5 years: full asset capacity3.

5 wt / d, 30% stake in Everbright Water, 19 wt / d, small change in performance.

Accompanying the company’s Qin Wangshan Industrial Solid Waste Disposal Project, which obtained the hazardous waste operating permit in January 2019, will bring new momentum for growth.

Proposed acquisition of municipal public facilities in Jiangyin City: In July 2018, the company announced the acquisition of public facilities in Jiangyin City to promote the marketization of related municipal drainage pipes and supporting assets in the urban area of Jiangyin.solicit opinions.

Asset injection will help the company expand its business scope and boost its performance growth.

Risk reminder: The demand for the pipeline network engineering of the engineering installation segment and the profitability of the industrial solid waste disposal project after commissioning are uncertain.