3Q21 performance is in line with our expectations
The company announced 3Q21 results: 3Q21's revenue was 3.678 billion yuan, an increase of 47.9% over the same period last year, and its net profit was 569 million yuan, an increase of 37.7% over the same period last year. Its income was 10.551 billion yuan, an increase of 87.5% over the same period last year, and its net profit was 1.874 billion yuan, an increase of 138.2% over the same period last year, in line with expectations. We believe that the increase in revenue is mainly due to the increase in the production capacity and sales volume of the current phase of hazardous waste harmless treatment and recycling of renewable resources.
Profitability declined slightly, and expenses were comprehensively optimized during the period. 1~3Q21 's gross profit margin fell 2.93ppt to 23.76% year-on-year, with a slight decline in profitability, which we believe is mainly affected by the increase in the proportion of copper with a relatively low gross profit margin in recycled products. Benefiting from the increase in revenue scale and the good control of company expenses, the expense rate during the 1~3Q21 period decreased by 2.93ppt to 4.00% compared with the same period last year, of which the sales / management / financial expense rate decreased by 0.26/1.98/0.69ppt to 0.19% to 2.31%.
Operating cash flow decreased slightly. The net cash flow of 1~3Q21 operating activities decreased by 22.57% to 36.106 million yuan compared with the same period last year, which we believe is mainly due to the increase in the purchase of production materials prepaid in this period.
Trend of development
The main industry of resource utilization is developing steadily, and the disassembly waste of lithium electricity is distributed and utilized. The company has put into production front-end production capacity of 1.78 million tons, hand production capacity of 970000 tons, there is still more than 50% room for improvement, at the same time, the company is also actively exploring new projects to expand the national layout. We are optimistic about the technology accumulation and channel advantages of the company's main industry of hazardous waste resources, and are expected to gradually increase market share under the background of stricter environmental supervision. At the same time, the company promotes the technical transformation of the tail-end production capacity, the nickel sulfate production line has been put into production, and the production capacity of cobalt sulfate and lithium carbonate is expected to be gradually put into production. We are optimistic that the company's lithium electricity disassembly waste utilization business will open up long-term growth space.
Active layout of pumped storage is expected to usher in development opportunities. The company started with medium and large hydrogenerator sets, has rich experience in the design and manufacture of complete sets of hydrogenerator sets, and its profitability has been improved year by year.
In September 2021, the National Energy Administration issued the medium-and long-term Development Plan of pumped Storage (2021-2035), proposing to vigorously promote the development of pumped storage. We believe that the company benefits from the increased demand for pumped storage. The company's clean energy equipment business is expected to usher in development opportunities.
Profit forecast and valuation
The net profit forecast for 2021 and 2022 will remain unchanged at 2.475 billion yuan. The current share price corresponds to a price-to-earnings ratio of 16.0 times 2022 / 15.4 times earnings. Maintain an outperform industry rating and a list price of 9.25 yuan, corresponding to 20.9 times 2021 price-to-earnings ratio and 20.1 times 2022 price-to-earnings ratio, which has 30.5% upward space compared with the current stock price.
Risk.
Metal prices fluctuated, project landing and capacity climbing were lower than expected, and the macroeconomic downturn affected demand.