Dongzhu Ecology (603359) In-depth Research Report: Ecological Wetland Leader Sets Off in Rural Market

Ecological wetland leader, orders increased significantly.

The company is mainly engaged in ecological wetland and municipal greening business. It is a leading company in the domestic wetland field. At present, it has formed a nationwide cross-regional business layout.

The company’s performance has grown steadily, and the growth rate has been increasing year by year. The company’s revenue in the first three quarters of 2019 was 13.

7 ppm, an increase of 16 in ten years.

1%, net profit 2.

47 ppm, a ten-year increase2.


Revenue from ecological wetland projects accounted for 57 in 2018.

6%, the proportion of municipal greening business is 39.

6%; the company is mainly in central and eastern China, the revenue share in 2018 was 54.

1%, 21.


In 2019, the company accumulatively won 21 new bidding projects with a total amount of 90.

60,000 yuan, a year-on-year increase of 200%; 16 new-year contract items, the contract amount is 67.

80,000 yuan, an increase of 162 in ten years.


The industry has huge space, and it has in-depth layout of various segments.

1) The market space for wetland restoration is huge: According to our calculations, the domestic ecological wetland restoration investment in the 杭州夜网 next three years is USD 480-522 billion. As a leader in ecological wetland, the company will help make full use of it.

2) Layout of National Reserve Forest and Desert Park Projects: The company is pursuing policy plans and actively deploying reserve forest and desert park projects. Two national single-tiered forest reserve projects are under construction.

3) Layout of rural construction and sewage treatment business: The company actively responded to the call of national policies and laid out the construction of rural facilities, rural revitalization and environmental protection.

2 rural construction projects were undertaken in 2019, for a total of 4 yuan.

5.3 billion, currently all budget projects have entered the construction phase.

Undertook a single sewage treatment project with a contract value of 400 million yuan.

4) The proportion of EPC project orders increased: the company’s business model includes EPC and PPP models. In the past two years, the company has mainly promoted the EPC model.

The proportion of EPC orders increased significantly. In 2019, we undertook 8 EPC projects with a total of 69 trillion. The proportion of orders in PPP mode decreased significantly. Since 2018, no new PPP projects have been added.

Benefiting from national policies, the company is expected to usher in a rapid growth period.

1) “Central Document No. 1”: The Central Government issued “Central Document No. 1” on February 5, stating that it is necessary to strengthen the construction of rural facilities, improve the governance of rural human settlements, and address rural ecological and environmental issues.

The company grasped the policy bonus and laid out the construction of rural facilities, rural revitalization and environmental protection projects. In August and October 2019, it won the bids for the construction of characteristic towns in Xiayi Yao Township, Mengshan County, and EPC in Gaomi City.Contract projects.

2) Approve special debts in advance to undertake environmental protection and rural construction: According to our statistics, the total amount of special debts issued in 2020 will be 7,881.

300 million, totaling 1281 for environmental protection and rural construction.

10,000 yuan, accounting for 18.


The special debt for the colony / ecological environment is 1168.

700 million, accounting for 14.

8%; the special debt for rural construction is 113.

400 million, accounting for 1.


As a leader in wetland ecology, the company’s earlier deployment of rural construction and ecological environmental protection projects is expected to benefit fully. Performance has maintained steady growth, and profitability has gradually improved.

1) Profitability has increased steadily, and the expense ratio has been stable during the period: The company’s gross profit margin has increased slightly in recent years, and its net profit margin has increased steadily. The gross profit margin in the first three quarters of 2019 was 27.

8%, net profit is 18.

5%; the company’s period expenses are stable, and the company’s management expenses decreased by 6% in the first three quarters of 2019, a slight increase from last year.

2) Interest rate ratios and cash flow have much room for improvement: corporate debt ratio error, corporate debt restructuring in the first three quarters of 201946.

1%, far lower than the industry’s expectations; the company’s cash flow has room for improvement in the past two years, and the conversion to EPC projects has increased the company’s cash flow situation.

Earnings forecasts, estimates and investment ratings.

We expect the company’s EPS to be 1 in 2019-2021.

32 yuan / share, 1.

71 yuan / share, 2.

22 yuan / share, corresponding PE is 12x, 10x, 7x.

The current industry average in 2020 is estimated to be about 14.

5 times, as the leader in the field of ecological wetlands, the company has better operating conditions, giving the company 15 times conversion in 2020, corresponding to a target price of 25.

65 yuan, the first coverage, given a “strong push” rating.

Risk warning: the company’s new orders are less than expected; the project progress is less than expected; the project payment is less than expected.

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