Event Overview
On August 19, 2021, the company disclosed its semi-annual report in 2021, which showed that during the reporting period, operating income reached 481 million yuan, an increase of 41.63 percent over the same period last year, net profit of 83 million yuan, an increase of 57.46 percent over the same period last year, and basic earnings per share of 0.20 yuan.
Analysis and judgment:
The income from investment and operation services increased by 68.42%, and the net profit maintained a high growth rate for half a year.
In the first half of 2021, the company achieved operating income of 481 million yuan, an increase of 41.63% over the same period last year, and the net profit attributed to shareholders of listed companies was 83 million yuan, an increase of 57.46% over the same period last year. The substantial increase in the company's operating income is mainly due to the increase in the scale of project contracting and investment operation business, especially the investment operation service business achieved revenue of 213 million yuan, an increase of 68.42% over the same period last year. The substantial growth in business was due to better new orders and the transfer of stock orders to operation, including 17 new engineering EPC orders with a total amount of 227 million yuan, confirmed revenue orders of 268 million yuan, an increase of 25.8% over the same period last year, and 621 million yuan of on-hand orders at the end of the period, an increase of 13.8% over the same period last year. New franchise orders for energy conservation and environmental protection totaled 707 million yuan, down 16.5 percent from the same period last year, while revenue from operating orders totaled 204 million yuan, an increase of 63.0 percent over the same period last year. In the future, with the orderly production of all kinds of projects under construction, the scale of operating projects will gradually increase, the capacity utilization rate will climb effectively, and the performance is expected to maintain high growth.
It is planned to issue convertible bonds to speed up the construction of the project, and the solid waste business will thrive.
On June 16, 2021, the company issued a plan to issue convertible corporate bonds to unspecified objects, which is intended to raise 864 million yuan, mainly for Chengde Luyuan thermal power construction project in Chengde County, domestic waste incineration power generation project in Dancheng County and supplementary liquidity. In recent years, the company has accelerated the development of solid waste business. In 2020, the company successively put into production the domestic waste incineration power generation project in Dejiang County and the domestic waste incineration power generation project in Huimin County. At present, the waste treatment load rate of the above two municipal solid waste incineration power generation projects has reached 100%. In 2021, the company has completed the 100% equity acquisition of Shanghai Die New Energy Technology Co., Ltd., which has a 30-year franchise for the Shijiazhuang municipal solid waste environmental protection power generation project, with a total design capacity of 1200 tons per day. Since May 2020, the two production lines have reached production capacity and entered the plant for waste incineration and 1100~1500t/d treatment. In 2020, the company's solid waste business income accounted for 5.03%. With the gradual growth of the company's solid waste business disposal scale, the company's solid waste income contribution will increase steadily. At that time, the company's "sewage + solid waste" double main industry will work together, and the company's performance will be high.
The cash flow performance is still strong, and the financial structure continues to be optimized.
In the first half of 2021, the company's net operating cash (excluding cash paid for investment in franchise projects) continued to be positive, that is, 33 million yuan, and the company's cash flow performance was still strong, mainly due to the increase in receipts in the current period. We judge that the increase in the company's collection is mainly due to the increase in the scale of the company's operating projects and the significant enhancement of operational efficiency, of which investment and operation service income increased by 68.42% over the same period last year, realizing cash inflow of 432 million yuan from operating activities, an increase of 52.11% over the same period last year. In the first half of the year, the company also strengthened its operation in the capital market, realizing a net cash flow of 358 million yuan in fund-raising activities, an increase of 822% over the same period last year, mainly due to the increase in financing scale. On the premise of expanding its leverage to ensure the financial stability of projects under construction, the company still maintained a relatively safe asset-liability ratio of 56.90% in the first half of the year, a decrease of 3.79pct compared with the same period last year. The company has a number of projects under construction, excellent financial structure, help the company to effectively promote the project process, orderly production according to the plan, increase the scale of operation, improve operational efficiency, achieve better cash flow recovery, conducive to the long-term development of the company.
Investment suggestion
The company has formed a "sewage + garbage" two-wing development pattern, sewage treatment business and garbage incineration business go hand in hand, helping the company's performance to grow at a high speed. The company acquires the environmental protection power generation project of domestic waste in Shijiazhuang to further increase the scale of solid waste operation, enhance the strength of solid waste business, and improve the performance of the company. The company can raise funds through convertible bonds, which will help to promote the construction of fund-raising projects and ease the financial pressure. Based on the rapid development of the company's solid waste business, construction progress of projects under construction and new orders, we raised our previous profit forecast from 1.44 billion yuan, 1.978 billion yuan and 2.645 billion yuan to 1.461 billion yuan, 1.983 billion yuan and 2.659 billion yuan respectively from 2021 to 2023, up 53.7%, 35.8% and 34.1% respectively over the same period last year. From 2021 to 2023, the net profit of homing was raised from 239 million yuan, 327 million yuan and 431 million yuan to 253 million yuan, 330 million yuan and 432 million yuan, respectively, an increase of 60.2%, 30.4%, 30.7%, respectively, and the corresponding EPS was 0.60,0.78,1.02 yuan. PE was times as much as 13-10-8, maintaining the "buy" rating.
Risk hint
1) the acquisition of new orders is not as expected.
2) the advance of on-hand orders is not as expected.
3) the slope climbing speed of the newly built MSW incineration project is not as fast as expected.