The net profit of returning to the mother continued to grow substantially. On January 28, the company issued a pre-increase announcement for its performance in 2021. It is expected to achieve a net profit of 220,02.45 billion yuan in 2021, an increase of 61.5% to 79.9% over the same period last year, and an increase of 84.1% to 105.1% over the same period last year. Among them, the net profit for the fourth quarter of 2021 is expected to be 330,5.8 million yuan, an increase of-43.3% and 0.2%, compared with 0.30 yuan per share in the same period last year. EPS is expected to increase to 0.41-0.46 yuan per share in 2021.

The reason for the sharp increase in performance. (1) the business of harmless hazardous waste treatment and recycling of renewable resources has developed steadily, the sales volume has maintained growth, and the revenue level and profitability have increased greatly compared with the previous year. (2) with the continuous improvement of the market prosperity of the clean energy equipment manufacturing industry, the company actively seizes the market opportunities of the industry, strives to continuously improve its technology research and development and manufacturing capabilities, and strengthens its internal cost control. The operating profit has increased to a certain extent compared with the previous year. (3) in the business merger transaction formed under the same control of issuing shares to both the controlling shareholder and a third party and paying cash to buy Shenlian Environmental Protection Group's equity (including Shenneng solid waste 40% equity) last year, in accordance with the relevant provisions of enterprise accounting standards, Shenlian Environmental Protection Group's net profit from the beginning of 2020 to the date of merger was included in the profit and loss of minority shareholders in the previous year of about 240 million yuan.

Under the background of "carbon neutralization", we focus on the direction of recycling of hazardous wastes. With the tightening of supervision, the real demand for hazardous wastes dumped and unreported in the past has been gradually released, and the CAGR of hazardous waste output in 2016-2019 has reached 16%, with broad space and rapid growth in the industry. In addition, recycled metals can greatly reduce carbon emissions compared with primary metals, and the recycling of hazardous wastes has a great prospect under the background of "carbon neutralization" and circular economy. The capacity plans related to the material grade of automotive lithium batteries approved by the company include: 15000 tons of refined nickel sulfate, 15000 tons of refined cobalt sulfate and 790 tons of lithium carbonate.

The reorganization of assets will help the transformation and meet the period of intensive production. Zhejiang Fu layout hazardous waste whole industry chain, from the front-end "collection-storage-harmless comprehensive treatment" to the back-end comprehensive recovery of polymetallic deep processing resources are covered, the production capacity has increased from 51.0 million tons / year at the end of 2019 to 177.8 million tons / year by the end of 2010. the operating region and production capacity continue to expand, Taixing, Lanxi capacity climbing, the future can be expected. In addition, the repurchase amount of no less than 150 million yuan and no more than 300 million yuan will be used in the company's later employee stock ownership plan or equity incentive plan to fully mobilize the enthusiasm of the company's senior managers and core backbone personnel and promote the long-term development of the company.

Investment suggestion: after the completion of the reorganization, the company has formed a dangerous waste leading enterprise with the layout of the whole industry chain, with advanced technology, strong enrichment and recovery capacity of small metals, and obvious geographical advantages in capacity layout. In the past two years, production capacity has been concentrated and released, under the background of strict environmental supervision and inspection, the future development is worth looking forward to. It is estimated that the net profit of homing from 2021 to 2023 is 2.78 billion yuan and 0.51 billion yuan respectively, and the EPS is 0.44 billion yuan and 0.51 billion yuan respectively. The corresponding PE is 14.8X/12.9X/11.1X. In addition, the company's traditional main business in the context of infrastructure development, hope to usher in new opportunities to maintain the "buy" rating.

Risk tips: 1, the macroeconomic downturn affects the supply of raw materials; 2, the progress of production is not up to expectations.