Sina tip: This is a research report column, which is only an analyst's personal views and opinions on a stock, not a formal news report. Sina does not guarantee its authenticity and objectivity. All effective information about the stock is subject to the announcement of the Shanghai and Shenzhen Stock Exchanges. Investors are respectfully advised to pay attention to the risks.

　　 Changjiang Securities

Event description:

　　 Blue water source Announce the signing of the project agreement, with the main contents as follows:

On December 26, 2012, the Company signed the Cooperation Intention Agreement on Capital Increase and Share Expansion of Beijing Jingjian Water Investment Co., Ltd. with Beijing Urban Drainage Group Co., Ltd. According to the agreement, the company plans to invest 100 million yuan in Beijing Jingjian Water Investment Co., Ltd. by means of capital increase and share expansion. After the capital increase, the company holds 20.8% of the equity of Beijing Jingjian Water Investment Co., Ltd.

Event comment:

Project overview: The registered capital of Beijing Construction Water is 36 million yuan, and the actual controller is Beijing Urban Drainage Group Co., Ltd. (Beipai Group holds 100% shares before this increase). The business scope includes water project investment, information consulting and water technology training. The main scope of cooperation this time: 1. Carry out water investment projects in Beijing suburbs by BT, BOT, entrusted operation, etc; 2. For the new construction or reconstruction and expansion project of the reclaimed water plant within the scope of Beijing Urban Drainage Group Co., Ltd., the project involving the membrane process shall be undertaken by Beijing Construction Water Engineering Co., Ltd. in priority; 3. Take advantage of the resource advantages of Beijing Urban Drainage Group Co., Ltd. and the company to undertake water projects nationwide; 4. Provide membrane technology services to reclaimed water plants adopting membrane technology nationwide.

Impact and significance on the company's performance: Beijing water market is an important market for the company's business development. The establishment of this joint venture will enable the company to occupy a larger market share in the construction of Beijing sewage treatment and reclaimed water plants in the future. At present, Beipai Group has a processing capacity of 974 million cubic meters, a recycling capacity of 560 million cubic meters, and a sludge disposal capacity of 1 million tons. The Group's drainage and reclaimed water service capacity and contribution rate account for 95% of the central urban area of Beijing and 80% of the city. According to the 12th Five Year Plan of Beijing, the total capacity of sewage treatment and reclaimed water supply will reach 7.6 million m3/day by 2015, and the sludge harmless disposal rate will reach 100%. According to the current treatment capacity, the total amount of sewage and renewable aquatic energy is about 4 million cubic meters/day, that is, there is still about 3.6 million cubic meters of new space in Beijing market. Beijing market has huge space. The company and Beipai set up a joint venture to bind interests. Beijing Construction Water will give priority to the construction of projects involving membrane technology, which will further consolidate the position of Blue Water in the central market of Beijing. At the same time, through the cooperation with Beipai, Beipai Group's resource advantages in the water market will be used to expand in the suburbs of Beijing, or even in the national market, which will help the rapid development of Biyuan's business.

Performance forecast and rating: We expect the company's EPS in 2012-2014 to be 0.97 yuan, 1.24 yuan and 1.66 yuan respectively, with corresponding P/E ratios of 40, 31 and 23 times, respectively. We maintain the company's "prudent recommendation" rating.

get into [Sina Finance and Economics] discuss