Core ideas:
The results in the first three / three quarters were + 43% and 31% respectively compared with the same period last year, and the project operation led to the continuous improvement of financial indicators. The company released the three-quarter report of 2021, the first three quarters of the company achieved revenue of 1.95 billion (year-on-year + 18%) and performance of 610 million (year-on-year + 43.4%). The significant improvement in performance is due to the operation of a number of projects and the improvement of overall capacity utilization, leading to a gross profit margin of 61% (year-on-year + 2.7pct). As a pure operating company, the volume of revenue has increased, the company's financial rate has been reduced by 2.8pct compared with the same period last year, and the net interest rate has increased by 5.6pct to 32% compared with the same period last year. In addition, the company's cash flow improved significantly, with the net operating cash flow reaching 300 million yuan (+ 117% compared with the same period last year).
The operating efficiency continues to improve, and the free cash flow is estimated or become a regular employee in 2023. The company handled 7.81 million tons of domestic waste in the first three quarters of 2021 (+ 21.5% compared with the same period last year) and generated 3 billion kilowatt-hours of electricity (+ 27.0% compared with the same period last year). The operating efficiency has continued to improve, with electricity generation per ton and online electricity per ton rising to 380 kilowatt-hours per ton and 314 kilowatt-hours per ton respectively. We estimate that the company may achieve a return to free cash flow in 2023, supporting the company's endogenous circular growth, and it is expected that the follow-up production capacity will be put into production without worries.
It is proposed to issue 2.4 billion convertible bonds for project construction, which will be put into operation quickly in hand production. The company's production capacity has been accelerated and increased by 2200 tons per day in the first three quarters, with a total capacity of 296 million tons per day in transportation and 603 tons per day in hand capacity, which is 1.04 times higher than that of (under construction + preparation for construction) / transportation. The company announced that it intends to issue convertible bonds to raise 2.39 billion yuan for the construction of five incineration projects, with a production capacity of 5000 tons per day. The company actively broadens the business boundary, as of the report, it has obtained 7 kitchen waste incineration projects, 4 waste incineration power generation projects to expand heating business, and actively develop towards incineration plus development.
Pure operating assets + improved efficiency, scarce AxiH incinerator, maintain a "buy" rating. It is estimated that the return net profit in 2021-23 is 79. 9 billion yuan respectively, and the latest closing price corresponding to A-share PE is 16.52,13.20,10.70 times respectively. With reference to the comparable company and the company's historical valuation, it is given a valuation of 25 times PE in 2021, corresponding to the reasonable value of 14.15 yuan per share, and with reference to the company's AH share premium ratio, corresponding to the reasonable value of H shares of HK $4.91 per share, maintaining the "buy" rating.
Risk tips. The progress of the company's project production is not as expected, and the capacity climbing is not as slow as expected.