Baichuan Changyin: a pioneer in carbon emission reduction focusing on the comprehensive utilization of biogas. Baichuan Changyin has focused on the comprehensive utilization of biogas and carbon emission reduction for more than a decade, through the recovery of biogas (the main component of methane) to generate electricity, reduce methane emissions and achieve carbon reduction. Since its inception, the company has developed and signed more than 100 projects at home and abroad, and put into operation more than 80 projects. By the end of the first half of 2021, the company had recovered about 2.773 billion cubic meters of methane, contributed 4.436 billion degrees of clean energy and reduced carbon dioxide emissions by about 30.56 million tons. Landfill gas power generation revenue is the core of the company's performance. In 2020, the company achieved operating income of 519 million yuan, an increase of 11.76% over the same period last year, and a net profit of 125 million yuan, an increase of 3.01% over the same period last year.
Landfill gas has a broad market for power generation, and the company's permeability is expected to increase. The improvement of urbanization rate in China has led to the continuous rise of the scale of municipal solid waste. Sanitary landfill and municipal solid waste incineration will maintain the trend of balanced development as the two main ways of garbage disposal in the future. The main component of landfill gas is methane, which is one of the sources of atmospheric pollution. Landfill gas is also a potential clean energy. Under the two-carbon background, landfill gas power generation is strongly supported by relevant national policies. In recent years, the new and cumulative installed capacity of biogas power generation in China has increased. By 2020, the installed capacity of biogas power generation was 890000 kilowatts, an increase of 12.66% over the same period last year, and 266 biogas power generation projects, an increase of 23.15% over the same period last year. As of 2019, the coverage rate of the national biogas power generation industry is less than 12%, and there is still a large market space.
Scale + technology advantage, help the company to expand its business. By the end of 2020, the company has provided landfill gas treatment services for 82 landfills, all projects connected to the grid power generation capacity 171.25MW. The company has 37 patents with the core of improving landfill gas collection efficiency and unit power generation efficiency, of which 4 are invention patents, providing a basis for the company to further develop small and medium-sized projects in third-and fourth-tier cities. The company actively carries out extension mergers and acquisitions and extension expansion, acquires Veolia project layout of first-and second-tier cities, while actively carrying out biogas utilization in non-garbage landfills such as kitchen waste and aquaculture dung, in order to seek new performance growth points.
Carbon emission reduction is expected to become a new growth point of the company. The national carbon emissions trading market was officially launched in July 2021, and the inclusion of more industries into the carbon trading market in the future will gradually increase the cost of carbon reduction. It is estimated that if the CCER project is restarted, under the condition that the carbon price is RMB 30Universe 100 respectively, the contribution of CCER to the revenue side is 1.79max 359max 598 million yuan, the elasticity of the corresponding income side is 32.15% shock 64.30% shock 107.16%, the contribution to the profit side is 1.35max 269max 448 million yuan, and the elasticity of the corresponding profit side is 96.45% 192.89% bank 321.49%.
Profit forecast and investment suggestion: it is predicted that the return net profit of the company from 2021 to 2023 will be 1.81,2.55 and 325 million, corresponding to the PE of 42.31,29.99,23.52 times. We value the company's 2022 target PE 35 times, with a target price of 55.65 yuan, covering it for the first time and giving it an "overweight" rating.
Risk hints: relatively single business, change in subsidy policy for landfill gas power generation, risk of landfill gas shortage or reduction of projects caused by municipal solid waste incineration instead of sanitary landfills, risk of policy changes related to CCER projects, failure of timely grid connection of power generation projects and the risk of intensified market competition.
