With the development of the project, there are many catalytic factors in the stock price; reiterate "buy"
We expect the steady growth path of China Conch Venture's core business 2H21 to be clear and sustainable. We believe that the sales volume of the hazardous waste disposal business is expected to increase steadily, which will alleviate the impact of the decline in average selling prices and promote steady profit growth. Thanks to the increase in production projects, the growth of waste power generation revenue is also expected to accelerate. We believe that the expected rebound in 2H21 cement prices and the expansion of the hazardous waste disposal business are expected to bring revaluation opportunities and boost the company's share price. We lowered our earnings forecast for 21-22-23 by 3.8%, 2.1%, mainly due to a reduction in the associate's revenue forecast, although this was partially offset by a higher sales forecast. We have lowered our target price based on the SOTP valuation to HK $49.8 (previous value: HK $52.0). Maintain "buy". In 21-22-23, the annual forecast EPS is 4.48pm 4.75tick 5.02 RMB.
The growth of main business is expected to accelerate in the second half of the year.
Driven by project expansion and steady growth in capacity utilization, China Conch Venture is expected to achieve steady growth in industrial hazardous waste disposal business. The company obtained nine hazardous waste projects in the first half of the year, with a total disposal capacity of 920,000 tons / year, with a total contracted disposal scale of 8.08 million tons / year. We believe that accelerated sales growth will not only offset the negative impact of the decline in average selling prices on earnings, but also lead to steady earnings growth. In addition, we believe that the decline in average selling prices will help the company to expand its market share by virtue of its more competitive cost advantage over its peers. In terms of industrial waste power generation, the company aims to put into production 19 projects in 2021, and the growth of 2H21 construction revenue is expected to accelerate, which we believe will bring solid profit contribution.
The rebound in cement prices and the continued expansion of hazardous waste disposal are expected to boost share prices. We believe that the decline in China Conch Venture's share price in June-July is partly due to the weak cement price caused by the outbreak of supply-side problems in the off-season. Therefore, we believe that cement prices are expected to pick up in the second half of the year, benefiting from the coordinated improvement of the industry and the tightening of government dual controls on energy consumption, which will become a catalyst for the company's share price to rise. As of September 10, the average national cement price has rebounded significantly from its recent low (July 23), with a cumulative increase of 37 yuan per ton. In addition, with the continuous expansion of the hazardous waste disposal business, we expect the business to usher in a revaluation, which is also one of the catalysts for the stock price.
Risk tips: 1) the climbing progress of the environmental protection project is not as good as we expected; 2) the fluctuation of cement price corresponds to the influence of the profit of the associated company.