Evergreen Group (002616) Semi-annual Report Comment: Heating Projects Accelerated

Evergreen Group (002616) Semi-annual Report Comment: Heating Projects Accelerated

Evergreen Group (002616) Semi-annual Report Comment: Heating Projects Accelerated
Event: In the first half of 2019, the company’s revenue was 99.201 million yuan, an increase of 17%.1%; net profit attributable to mothers was 95.63 million yuan, an increase of 208%; second-quarter revenue was 50.53 million yuan, an increase of 16.9%, net profit attributable to mothers was 47.59 million yuan, an increase of 338%.The improvement of outstanding performance is primarily due to the increase in performance of the central heating sector.  The Mancheng project led to high revenue growth.In the first half of the year, the company’s revenue was 99.09 million yuan, of which cogeneration and waste treatment / kitchen appliances and valve products / outdoor and heating supplies revenue were 599.1 / 14470/2482 million, an increase of 58.5PCT / 9.5PCT / -26.3PCT.The substantial increase in combined heat and power generation revenue was mainly contributed by the Mancheng project. The export of outdoor and heating supplies has improved due to the impact of the trade war.The gross profit margins were 23 respectively.9% / 27.5% / 31.1%, the same increase of 9.5PCT / 3.9PCT / 8.0PCT.The increase in the gross profit margin of the cogeneration unit is mainly provided by the Mancheng project to supply industrial steam. The gross profit margin is higher. The higher gross profit margin of kitchen appliances and outdoor products may be related to the company’s shrinking production line.  The Mancheng project has strong profitability.2019H, Mancheng project revenue 2.30,000 yuan, net profit 53.05 million yuan, net interest rate 22.6%, through the increase of steam supply in the combined heat and power project of the Mancheng Paper Products Industrial Park, the profit scale of Mancheng helps to increase.The Zhongshan, Yishui, Mingshui, Yutai, and Ning’an projects that the company has already run contributed a total net profit of 4270/6957 million yuan in 2018H / 2019H. In comparison, the Mancheng project has outstanding profitability.  Government subsidies decreased by 20.39 million yuan, and asset impairment decreased by 21.52 million yuan.In the first half of 2018, due to the lag in the subsidy of electricity charges for the Yutai project, the company had an asset impairment loss of 29.44 million yuan. The expenditure supplement was replaced at the end of 2018. The company’s asset impairment loss in the first half of 2019 was 7.92 million yuan, a decrease of 21.52 million yuan.The government subsidy was 60.64 million yuan in the first half of 2018 and 40.25 million yuan in the first half of 2019. The government subsidy was also reduced by 20.39 million yuan.  Management fee rate, sales rate decreased, and cash flow turned positive.In the first half of the year, the company’s sales rate / financial rate / management rate were 2 respectively.6% / 2.9% / 10.5%, the same increase -0.9PCT / 0.9PCT / -0.8PCT.The increase in financial rates was mainly due to an increase in projects under construction and an increase in index expenditure.Net cash flow from operating activities in the first half of the year was 28.25 million yuan, compared with 95.17 million yuan in the same period last year. Cash flow improved.  Seven heating projects are expected to start production by the end of the year, and six new cogeneration projects will begin.The third phase of the 上海夜网论坛 central group project has entered the trial operation phase of the Wucheng and Qujiang projects; the construction of Maoming, Tieling, Yongcheng, and Yixian has come to an end. The above seven projects are expected to be put into operation.In the first half of 2019, the company also started 7 new high-quality biomass cogeneration projects including Xinye, Yanjin, Huaxian, Funing, Songyuan, and Binxian.  Profit forecast: The company’s revenue for 2019-2021 is expected to be 30.1/39.1/44.3 trillion, corresponding to the net profit attributable to mother is 3.4/5.4/7.1 ppm, EPS is 0.46/0.73/0.96 yuan / share, corresponding to PE of 14.5X / 9.0X / 6.9X.The company’s heating projects are expected to continue to be put into operation, and maintain the “Buy” rating.  Risk reminder: The risk of arrears in supplementary electricity bills for biomass plants, the project progress is not up to expectations.