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Research Report: Stock code:
  13-10-2015 (二)    Grandblue ENV (600323.CH) - Post-acquisition results significantly enhanced
  12-10-2015 (一)    GAC (2238.HK) - Competition Remains Tense but Positive Factors are Accumulating
  09-10-2015 (五)    Agriculture Bank of China (1288.HK) - Profit Growth Slowed Down and the Valuation Becomes Attractive
  08-10-2015 (四)    Chinasoft International (354.HK) - Fast growth would continue
  07-10-2015 (三)    Singyes Solar (750.HK) - Still positive on the Company's Development
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Grandblue ENV(600323)
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Recommendation on   13-10-15 
Recommendation Buy
Price on Recommendation Date $ 12.890
Suggested purchase price N/A
Target Price $ 17.500
Weekly Special - 354 Chinasoft International
Written by: Zhang Kun( Research Analyst )
(+ 86 21 51699400-104)


Grandblue ENV (600323.CH) - Post-acquisition results significantly enhanced

Results being enhanced significantly

In 2015H1, Grandblue recorded operating income of RMB1.665 billion, up 47.22% yoy; and business profit of RMB262 million, up 12.41 yoy. Net profit attributable to shareholders of parent company hit RMB189 million, up 15.15% yoy; while weighted average rate of return on net asset recorded 4.43%, dropped 2.37 ppts yoy. Earning per share is RMB0.25. The enhanced business results is mainly contributed by the pretty profit and loss sheet of C&G Environmental Protection (China). In the upcoming two years, C&G would enhance the net profit of Grandblue by RMB100 million and 160 million respectively.

Rapid development in various business segments

The Company's income from solid waste treatment in 2015H1 amounted to RMB512 million, significantly surged 184.59%. Various projects are undergoing normal operation in the Environmental Protection Industry Park for Solid Waste Treatment in Nanhai. Both projects of expansion of Nanhai Waste Incineration Plant I and Nanhai Food Waste Treatment were smoothly completed in June 2015. By signing the contract of acquiring the sanitary landfill for domestic waste in Bainikeng of Sanshui district, the Company would include waste landfill project in its business and further enhance the supply chain of solid waste treatment business. Income from water supply amounted to RMB311 million in 2015H1, up 32.43% yoy. However, due to a number of reasons which include the loss incurred by the subsidiary of water supply, the newly recorded depreciation after the commencement of operation of the new Guicheng Water Treatment Plant, additional cost from Guicheng boosting pump station, and the increase in financial costs etc, the profit of the water supply segment significantly dropped 85.34%. The Company has completed the project of collaboration of water supply of two towns of Dali and Xiqiao. Up till now, the Company has successfully accomplished all collaboration projects on water supply for all streets and towns in Nanhai district, taking the basic control of the end-user market of water supply in Nanhai district. Currently, water price adjustment has been started in Nanhai district. Once the water price adjustment is implemented smoothly, the Company's drop in profit could possibly be reduced.


Due to the acquisition of C&G Environmental Protection (China), the Company's business results in 2015H1 has demonstrated significant growth and the future development of business is more consolidated. We adjust the target price downward to RMB17.5 and keep the rating of “Buy”. (Closing price as at 9 Oct 2015)


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