Outstanding Technology & Business Model

In: Business and Management

Submitted By shuwchen
Words 584
Pages 3
Initial Coverage
November 9, 2011
Junhua CHEN
SFC CE Ref: AQH357

Environmental Services

RESEARCH
Initiate with BUY

chenjunhua@cicc.com.cn

Shuwei CHEN shuwei.chen@cicc.com.cn Beijing Originwater Technology (300070.SH)
Outstanding Technology & Business Model
2010A 500 60 236 61 209 68 177 65 1.20 24 36.9 2.2 6 0.2 2011E 929 86 426 81 368 76 313 77 0.97 (20) 45.9 4.5 10 0.3 2012E 1,470 58 707 66 608 65 519 66 1.61 66 27.7 4.0 14 0.7 2013E 2,301 57 1,105 56 946 56 809 56 2.50 56 17.8 3.4 19 1.1

Financial highlights
(Rmb mn) Revenue (+/- %) Gross Profit (+/- %) Operation Profit (+/- %) Net Profit (+/- %) EPS(Rmb) (+/- %) PE(X) PB(X) ROE (%) Dividend Yield(%) 2008A 221 7 92 7 81 8 75 6 0.68 6 65.3 22.3 34 0.3 2009A 314 42 146 59 124 53 107 43 0.97 43 45.6 15.2 33 0.1

Investment highlights
With membrane bioreactor (MBR) technology, Beijing Originwater Technology achieves fast cross-regional expansion by creating joint ventures with local state-owned enterprises, a means of ensuring stable MBR sales in the medium-/long-term and riding on the steady growth of local sewage treatment markets. The company’s technological advantage matches the 12th FYP sewage treatment development strategy. 1) Urban sewage treatment regulations to be raised from Standard II to Standard IB, meaning 40% of waste water should be recycled in north China cities with water shortages; 2) MBR can produce better water quality than traditional technology, matching 12th FYP sewage treatment program; and 3) MBR expected to have a market size of about Rmb40bn. Above-average profitability due to integrated value chain. 1) The 2mn-sqm ultrafiltration membrane production line built with the IPO proceeds can not only generate profits but also lower membrane production cost and widen GM in the company’s membrane unit and sewage treatment solution businesses; and 2) the Rmb1.9bn of…...

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