Original Water300070: Cooperating with Beijing Drainage Group to Safeguard Beijing's Dominant Position

It is expected that the company will maintain its strong position in Beijing's water market. According to the goals announced in Beijing's 12th Five-Year Plan for Water Resources Protection and Utilization, by 2015, Beijing's sewage treatment and recycled water utilization production capacity will reach 8.22 million cubic meters per day. We estimate that the new capacity will be about 4 million cubic meters per day, corresponding to an investment demand of about 14 billion yuan. Beijing Urban Drainage Group Co., Ltd. is one of the backbone enterprises of the capital's infrastructure. The group's drainage and recycled water service capacity and contribution rate account for 95% of Beijing's central urban area and 80% of the entire city. It is expected that this cooperation will further consolidate the company's dominant position in the place where it started, and benefit from the increased certainty of Beijing's water investment growth.

The company has been making frequent moves recently, and its competitive advantages have gradually become more prominent. Since November, the company has made frequent overseas investments, including the joint venture with the Chinese Academy of Environmental Sciences to enter the field of environmental assessment and the joint venture with Zhongguancun (000931) to enter the field of financial leasing, which shows the company's strategic intention to actively enter the upstream and downstream of the industry and expand the space for membrane technology application industry. The proportion of membrane technology in China's sewage treatment field is less than 4%. This water treatment technology with small footprint and high comprehensive benefits has been well promoted abroad. In the future, it is not ruled out that the Ministry of Finance will issue subsidies specifically for membrane technology water treatment. Originwater's MBR technology is leading in China and has a higher cost-effectiveness than foreign companies such as GE and Simens. Its competitive advantage will be further highlighted in the expansion of the industry.

Finance and Valuation

Raise the 2013 profit forecast and maintain the buy rating. The company expects the full-year performance growth of 55%-80% in 2012, which is in line with our expectations. The expected growth highlights in 2013 come from the increase in the volume of the Dianchi Lake project in Yunnan and the continued growth of the Inner Mongolia and Taihu Lake projects. Based on the recognition of the company's business model and the good judgment of the prospects of the membrane water treatment industry, combined with the company's current project progress, the company's 2013 and 2014 profit forecasts are raised to 1.53 and 1.98 yuan, respectively. With reference to the 27-fold average valuation of comparable companies in 2013, the company is given a 10% premium, that is, 30 times PE, corresponding to a target price of 45.90 yuan.

Risk Warning

The project release progress is not up to expectations, and the deterioration of local finances has led to the delay of receivables. (Orient Securities)

Antai Technology (000969): Performance is lower than expected, and amorphous strip is optimistic in the long term

The company's earnings per share are expected to be 0.23 and 0.31 yuan in 2013-2014, corresponding to dynamic PE of 45X and 33X. The company has started substantial cooperation with State Grid, and the amorphous strip business is expected to grow explosively in 2013. However, considering the slowdown in the growth of the company's other businesses and the current valuation level, we temporarily maintain the "recommendation" rating.

Key points:

Performance is lower than expected. The company released its 2012 performance report, and it is expected that the net profit attributable to shareholders of listed companies in 2012 will be 69 million to 126 million, a year-on-year decrease of 60%-78%, and basic earnings per share will be 0.08 yuan to 0.15 yuan. Performance is lower than expected.

The economy is declining and expenses are increasing. The main reasons for the sharp decline in the company's performance are: 1) Affected by the macro-economy, the downstream industries involved in the company's main products have experienced a sharp decline in prosperity; 2) The company's financial expenses and depreciation expenses of newly added fixed assets have increased; 3) The German Odersun AG, in which the company holds a stake, is in the process of bankruptcy liquidation, and a full impairment provision of 52.012 million yuan has been made for this.

The explosive period of the amorphous strip market is approaching. Under the specific goal of energy saving and consumption reduction, it is imperative to promote amorphous alloy transformers. The State Grid requires that 50%, 55% and 60% of the newly added transformers in 2012-2014 should adopt amorphous alloy transformers, and in principle, all the updated transformers should adopt amorphous alloy transformers. It is expected that in 2013, China's amorphous alloy transformers will drive the explosive growth of the amorphous strip market. By 2015, the annual demand for amorphous strips will reach 140,000 tons, with an annual compound growth rate of 29%, and the demand gap is huge. Enjoy the industry feast, and the amorphous performance is expected to explode in 2013. Antai Technology, as one of the only two companies in the world that can produce amorphous strips on a large scale, has been engaged in the research and development of amorphous materials for 20 years, relying on the National Amorphous Microcrystalline Alloy Engineering Technology Research Center, and has cooperated with the State Grid to establish Antai Nanrui. It will not only benefit from the technical support of the State Grid, but also rely on its background to smoothly open up the market. Considering the explosive growth of amorphous transformers in 2013 and the 60,000-ton expansion project to be launched at the end of the year, the amorphous strip business is expected to achieve explosive performance in 2013. It is estimated that the EPS contributed by the amorphous business in 2013-2014 will be 0.07 and 0.12 yuan.

Risk warning: The industry's prosperity has further declined; the amorphous strip business is lower than expected. (Great Wall Securities)

Dongcai Technology(601208): Halogen-free flame-retardant polyester project is worth looking forward to

The flame-retardant polyester market has a large space. As an important flame-retardant material, flame-retardant polyester has a wide range of applications in industrial textiles, building interior decoration materials, transportation interior decoration materials, protective clothing, flame-retardant foaming materials, engineering plastics and flame-retardant polyester films. China's annual demand for flame-retardant polyester exceeds 1 million tons, while China's current flame-retardant polyester production capacity is only 60,000 tons, which is far from meeting market demand.

The halogen-free permanent high flame-retardant polyester project is worth looking forward to. The company's polyester products have received good reviews in market applications, but currently there is only 10,000 tons of production capacity and only a small amount of takeout, which is completely unable to meet the needs of the market. The new halogen-free permanent high flame retardant polyester resin technology is the company's own technology and has formed large-scale production. The success of this trial run is a high probability event. Halogen-free permanent high flame retardant polyester will become a new source of profit for the company, which is worth looking forward to.

The projects under construction can ensure the company's continued growth in the next few years. Six projects under construction, including 20,000 tons of polyester film, 3,500 tons of polypropylene film for capacitors, 2,000 tons of polypropylene film for ultra-thin capacitors, 30,000 tons of halogen-free flame retardant polyester, 7,200 sets of large-size insulation components and 20,000 tons of optical-grade polyester film, will be put into production and contribute to performance in the next two to three years, which can ensure the company's continued growth in the next few years.

Maintain the company's "overweight" rating. It is expected that the company's earnings per share in 2012-2014 will be 0.24 yuan, 0.42 yuan and 0.61 yuan respectively, and the company's "overweight" rating is maintained. (Guohai Securities)

Nanfang Pump Industry (300145): Performance slightly exceeded expectations, and growth in 2013 will be stronger

The turning point of single-quarter performance growth has been confirmed, and the increase in market share and optimization of product structure are the core reasons driving growth. Based on the full-year performance forecast, the year-on-year growth rate of net profit in the fourth quarter may be 38%, an increase of about 14 percentage points from the previous quarter, and the turning point of performance improvement has been confirmed. The main reasons for the company's performance in 2012 being better than the industry level are:

(1) The sales network has outstanding advantages and the market share has further increased. Grassroots survey feedback shows that the company's market share relative to foreign brands has increased significantly.

(2) The demand for variable frequency water supply equipment and TD pipeline pumps is strong, and the gross profit margin is higher than other products, which has driven the growth of overall revenue and gross profit margin.

It is expected that the company's performance will continue to maintain rapid growth in 2013, mainly due to the following reasons:

(1) The strengthening of the marketing network will help accelerate sales expansion and the market share will further increase. The company has completed full coverage of the Chinese market. The number of sales staff has increased from 100 in 2010 to more than 400 at present. The service response speed has been greatly improved, and the cost-effectiveness of the products has been further highlighted. At the same time, the strengthening of the sales network has provided a solid channel foundation for the sales of new products such as industrial pumps and sewage treatment pumps in 2013.

(2) The order volume of water conservancy pumps is sufficient and will become an important growth pole for performance. It is expected that the sales volume of water conservancy pumps will double year-on-year this year.

(3) New products are gradually entering the harvest period. The company's main new products, sewage treatment pumps and seawater desalination pumps, will enter the harvest stage in 2013, providing additional performance growth.

We believe that the company has the potential to become an "ITT"-style multi-product water pump giant, and there is room for sales to grow several times. The main reasons are: 1) In the next few years, China's urbanization, water conservancy construction and other investments will still generate huge demand for water pumps, and the pump production capacity of Chinese companies is gradually approaching the most advanced international level, providing conditions for expanding import substitution; 2) The company's competitive advantage lies in product quality control and after-sales service, and it has the strength to achieve product diversification. At the same time, the company has sufficient cash on hand, which can be used for horizontal expansion in the industry. It is expected that the company's stainless steel pump, water pump and other businesses will maintain a high growth rate in the next three years, and new businesses such as sewage treatment pumps and seawater desalination pumps will gradually become new growth points. The average annual growth rate of overall performance may exceed 30%.

The company's revenue in 2012-13 is expected to be approximately 1.1 billion and 1.4 billion, and earnings per share are approximately 0.89 yuan and 1.17 yuan, corresponding to the current closing price of PE 23 and 17 times, respectively, maintaining a "recommended" rating.

Risk Warning

The weak macro-economy has led to a significant decline in demand for stainless steel pumps; the advancement of new businesses is slower than expected. (Changjiang Securities)

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