This report is read as follows:
Hazardous solid waste business maintained a strong growth momentum, waste incineration sector revenue and profit structure improved significantly, energy-saving equipment began to show accelerated growth.
Summary:
Maintain the "overweight" rating. The company's 2021H1 revenue of 3.88 billion yuan increased by 37.71%, and the return net profit of 3.777 billion yuan increased by 0.24%, in line with expectations. The new base of the dangerous solid waste plate began to contribute to the performance, and the operating income of the waste incineration business continued to have a significant volume effect. The cement joint venture income was under pressure in the first half of the year under the background of coal price increases, but the price elasticity in the second half of the year is expected to be strong. The company's return net profit forecast for 2021-2023 is 81.3 billion RMB, maintaining the target price of 45.60 Hong Kong dollars, and maintaining the "holding increase" rating.
Hazardous solid waste maintains a rapid momentum, and the new area is expected to continue to release volume. In 2021, H1 hazardous solid waste business achieved a total revenue of 732 million yuan with an increase of 86.93%, maintaining a strong growth momentum, mainly due to the release of new market capacity in the early stage. 2021H1 company hazardous fixed waste disposal gross profit margin of about 61.99% year-on-year decline of about 4.5pct, from the low gross margin area volume dilution and the company's market occupation strategy. With the new production capacity of Guangdong, Hunan, Anhui and other markets starting to start production in H1, the growth potential of the plate remains strong.
The gross profit of the operation period of the waste incineration plate began to exceed the construction period. The operating income of the waste incineration sector reached 2.667 billion yuan in 2021, of which 2.107 billion yuan during the construction period and 560 million yuan from the operation period. It is worth noting that the gross profit of the H1 operation period reached 340 million yuan for the first time exceeded the gross profit of the construction period (322 million yuan). The increasing trend of contribution during the operation period is becoming more and more obvious, and the plate revenue and profit structure are expected to continue to improve. In the context of rich reserve projects, we estimate that the production capacity may increase by more than 4 million tons in 2021, which will provide strong support for the further growth of income during the construction period and the business period in the future.
The acceleration of the development of energy-saving equipment is beginning to be reflected, and the revenue of H2 joint venture is expected to show. Under the current trend of carbon neutralization, the cement industry is also facing the trend of further equipment emission reduction and transformation. With the gradual clarity of the policy route of energy saving and emission reduction in the cement industry, the business itself has room for further development. 2021H1's energy-saving equipment revenue of 306 million yuan, with an increase of 81%, the acceleration trend has begun to be clear.
The sharp increase in 2021H1 coal prices brings some pressure on the profitability of the cement joint venture, but H2 with the appearance of positive factors on the supply side, price elasticity is expected to transmit more cost pressure.
Risk hint: environmental regulation is not as expected; cement demand is falling off the cliff.