New waste incineration power generation project promotes high profit, reiterating "buy"
Green Power announced its third-quarter results on October 29: revenue rose 8.8% year-on-year to 694 million yuan, and net profit increased 31.4% to 235 million yuan. The income / return net profit in the first three quarters increased by 18.0% compared with the same period last year, respectively. 43.4% to 19.46 / 614 million yuan. The highlights of the waste incineration power generation business in the first three quarters: 1) the new Shishou, Yongjia Phase II and Pingyang Phase II projects have been put into production one after another; 2) the financial expense rate has declined.
We maintain the 2023 homing net profit forecast of 2021 EPS0.55/0.71/0.87 and give the company 10x a 2021 forecast PE valuation (consistent with its three-year historical PE average) of HK $6.69 (previous value: HK $5.50). The net profit forecast for 2023 is 7.66 / 9.84 / 1.218 billion, corresponding to the company 10x's 2021 forecast net profit valuation of HK $6.69 (previous value: HK $5.50), which is the same as its three-year historical PE average. Repeat "buy".
New garbage power generation project is put into operation, financial expense rate is declining.
The company's newly built Shishou, Yongjia Phase II and Pingyang Phase II garbage power generation projects have been put into production in March and April 2021. In addition to the increment brought by the new capacity, the stock projects such as Anshun Phase II and Shantou Project ran smoothly and capacity utilization increased in the first three quarters. In addition, the fixed increase completed by the company at the end of 2020 reduced the asset-liability ratio, with the financial expense rate falling by 3.4 percentage points in the third quarter of 2021 / the first three quarters of 2021 by 2.8 percentage points. Under the combined influence of the new capacity, the increase in capacity utilization and the decline in the rate of financial expenses, the net profit of homing in the first three quarters increased by 43.4% compared with the same period last year.
4Q21 is expected to continue strong high-quality growth
According to the company's report, the management plans to launch the Sihui Phase II / Jiamusi Phase II / Sands project (with a total production capacity of 1800 tons / day) by the end of 2021, and we expect these projects to contribute considerable profits. By the end of 2021, the total capacity of the company's waste power generation project is expected to reach 33,000 tons per day. According to the pace of the company's project construction, we believe that the company can maintain a growth rate of 10-20% in new capacity in 2022-2023. In addition, the issuance of its A-share convertible corporate bonds has been accepted by the CSRC, so we expect the financial pressure on 4Q21 to be further alleviated.
The target price is HK $6.69, reiterating "buy"
We maintain the 2023 homing net profit forecast of 2021Universe 2022Universe 7.66 / 9.84 / 1.218 billion, corresponding to EPS of 0.55, 0.71 and 0.87, and give the 2021 target PE of the company's stock 10x (in line with its three-year historical PE average), corresponding to a target price of HK $6.69 (previous value: HK $5.50).
Repeat "buy".
Risk tips: 1) the project climbing is slower than we expected; 2) the subsidy policy is not as good as expected for waste power generation enterprises.