Event: the company announced its mid-term results in 2021 that the company's 2021H1 achieved operating income of HK $2.131 billion, an increase of 37.44% over the same period last year, and a net profit of HK $249 million, an increase of 14.10% over the same period last year. Excluding epidemic subsidies and other factors, it realized a net profit of HK $223 million, an increase of 43.3% over the same period last year.
After excluding the influence of subsidy factors, the sanitation plate rose steadily, and the release of hazardous waste capacity led to a high increase in performance.
(1) the sanitation sector 2021H1 achieved operating income of HK $1.637 billion, an increase of 29.3% over the same period last year, and its gross profit margin decreased by 4.4 pct to 27.4% compared with the same period last year (excluding the impact of the epidemic, the gross profit margin decreased by 0.7% pct to 25.6%). As of the end of 2021H1, the company had 113 hand sanitation projects, with an annual service fee of HK $3.63 billion, with an average service life of 9 years, and an average income per square meter of service area increased by 3.2% to HK $6.40 compared with the same period last year.
(2) the operating income of the hazardous waste sector 2021H1 reached HK $341 million, an increase of 76.3% over the same period last year, and the gross profit margin increased by 0.3 pct to 40.1% compared with the same period last year. Among them, the actual handling capacity of harmless business increased by 172.2% year-on-year to 106600 tons due to the smooth climbing of project capacity in Yichang and Xinjiang, the average unit price decreased by 28.2% to 2077 Hong Kong dollars / ton, and the gross profit margin decreased by 3.1 pct to 43.1% compared with the same period last year. The actual handling capacity of the resource utilization business increased by 4.6 per cent year-on-year to 29800 tons, the average unit price increased by 42.6 per cent to 4014 Hong Kong dollars / ton in the context of higher methanol prices, and the gross profit margin increased by 3.8 pct to 34.6 per cent year-on-year.
Continue to pay attention to the acceptance of sanitation projects, and ensure that the performance of hazardous waste projects continues to improve after they are put into production.
(1) under the influence of many factors, such as the change of some local governments, the intensification of external competition, and the prudence of their own choice of projects, the acceptance of sanitation projects of 2021H1 Company is not very satisfactory. Two new sanitation projects have been signed with an annual contract value of HK $19 million. However, the company still adheres to the full-year target of increasing the annual contract value of HK $1 billion, and strategically focuses on the development of the Pearl River Delta region at the regional level. at the project level, we adhere to the development of large-scale long-cycle projects, while increasing the tracking of small-volume long-cycle projects.
(2) as of 2021H1, it has put into operation a production capacity of 436 million tons per year for harmless business and 250,000 tons per year for resource utilization. At the same time, it has three harmless projects under construction (with a total production capacity of 85000 tons per year). In the future, on the one hand, the company will steadily promote the smooth operation of projects under construction to ensure steady growth in performance, and at the same time, the company will strengthen the development of resource-based projects, and strive to form a situation of equal emphasis on resources and harmlessness in the future.
Maintain the "buy" rating: we maintain the original profit forecast and expect the company's 21-23 net profit to be HK $5.28 million, respectively. The current share price is only 4 times 22-year PE. Although the order taking situation of the company's sanitation project in the first half of the year is not very satisfactory, we are still optimistic about the advantages of the company's cost control, integrated layout and government relations in ensuring the company's sanitation project in the future. At the same time, the profit situation of hazardous waste projects is expected to pick up significantly in 21 years, taking into account the company's performance growth, valuation is still undervalued, and there is still room for future valuation to maintain the "buy" rating.
Risk hints: increased competition in the sanitation market has led to new orders and profitability falling short of expectations; production and disposal prices of hazardous waste projects are lower than expected; goodwill risks brought about by mergers and acquisitions, etc.