Dongjiang Environmental Protection’s （00895 HK or "DJEP"） 1Q2019revenue increased 6.4% YoY to RMB807 million. Shareholders’ net profitdecreased 11.0% YoY to RMB108 million. Results were slightly worsethan expected, mainly due to higher-than-expected increase in expense.Overall gross margin slightly improved 0.7 ppts to 36.1%.
We expect industrial waste recycling revenue CAGR to be 14.4% andindustrial waste treatment and disposal revenue CAGR to be 22.6% in2018-2021. In addition, we expect overall gross margin to stay between33.3% and 34.7% in 2019-2021, and expect the Company to have enoughfinancial resources to pay for funding needs for the next three years evenwithout equity financing.
Our 2019-2021 EPS estimates are RMB0.517, RMB0.707 and RMB0.886,respectively. Although 1Q2019 results missed expectation, the Company’sgrowth prospects remain intact alongside an abundant pipeline to be put intooperation over the next three years. Slightly revise down the TP toHK$9.00, representing 2019/ 2020/ 2021 PER of 15.0x/ 11.0x/ 8.7x.Maintain "Accumulate".