20210908-招银国际-博奇环保-02377.HK-Strategic_transformation_starts_to_bear_fruit_4页_440kb

Boqi Environmental (2377 HK) Summary

Core Content

Boqi Environmental (2377 HK) has announced strong 1H21 results, driven by the recovery of flue gas EPC projects and the successful development of new businesses in water treatment and solid waste treatment. The company is undergoing a strategic transformation to shift its focus from the saturated flue gas treatment market to more sustainable and scalable industries, which is expected to drive long-term growth.

Main Points

• Strategic Transformation: Boqi is transitioning from traditional flue gas treatment to more sustainable and scalable businesses, including industrial wastewater treatment and hazardous/solid waste treatment.
• Revenue Growth: Revenue increased significantly to RMB926.854 million in 1H21, up 55.4% YoY, driven by project execution and a better business mix.
• Profitability Improvement: Gross profit rose by 10% YoY to RMB184 million, and net profit surged by 53.1% YoY to RMB163 million, reflecting improved operational efficiency and cost management.
• Flue Gas Treatment Recovery: The flue gas treatment business saw a 26% YoY revenue increase to RMB771 million, with EPC revenue rising 94.3% YoY to RMB284.4 million, due to the recovery of EPC projects post-pandemic.
• Diversification into New Markets: Boqi is expanding into the steel and petrochemical industries for flue gas EPC projects and is also making progress in industrial wastewater treatment, including a major project with chemical companies and a first coking wastewater zero discharge EPC project.
• New Business Breakthroughs: The company has made progress in hazardous and solid waste treatment, with projects like the Tangshan Yandong Cement Kiln and Sinopec Xinjiang Industrial Zone drilling fluid solid waste treatment. The energy-saving market is also becoming a key growth area.
• Valuation: Boqi is currently trading at 0.6x PBR, which is considered increasingly attractive given its strategic shift and improved financial performance.
• Stock Performance: The stock has shown mixed performance over different time frames, with a 48.5% increase in the 12-month period.

Key Financial Metrics

Shareholding Structure

Stock Data

• Market Cap: HK$2,075 million
• Avg 3 mths t/o: HK$7.01 million
• 52w High/Low (HK$): 2.8 / 1.0
• Total Issued Shares (mn): 1,007

Share Performance

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months.
• NOT RATED: Stock is not rated by CMBIS.

Analyst Certification

• The research analyst certifies that the views expressed reflect their personal opinions and that no part of their compensation is related to the specific views in this report.
• The analyst confirms no trading in the stock covered within 30 days before the report was issued and no trading for 3 business days after.

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• Past performance does not guarantee future results.
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Legal & Regulatory Information

• Hong Kong: The report is prepared for clients of CMBIS and its affiliates.
• United Kingdom: The report is only for persons within Article 19(5) of the Financial Services and Markets Act 2000 or Article 49(2)(a) to (d) of the Order.
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