Investment Summary:
Water solid is the wheel, leading the comprehensive development, "ecology +" to enhance business coordination. The company starts with water affairs and continues to expand its business scope, forming four major plates: urban water affairs, solid waste business, comprehensive management of ecological environment and green resource management. The company's revenue mainly comes from the two parts of water and solid, and its performance is growing rapidly. From 2016 to 2020, the compound growth rate of operating income and return net profit is more than 24%. In 2021, the company put forward the "ecological +" strategy, the acquisition of the first atmosphere to complete the "water, solid, gas, energy" strategic layout, through the promotion of business coordination to promote comprehensive performance development.
Operation efficiency, escort water continued to grow.
The collection rate drives the growth of water, and the operation puts in a large amount of price increment income. The 14th five-year Plan regards the increase of sewage collection rate as the goal of planning and development for the first time, and becomes another driving force for the improvement of sewage treatment capacity. During the 13th five-year Plan period, the price of sewage treatment capacity increased, the operation improvement and control cost further magnified the revenue, the compound growth rate of sewage treatment revenue reached 33.8%, the gross profit margin rebounded rapidly, and future growth is expected.
The water supply market tends to be saturated, and the water price reform highlights the operational value. In the context of market saturation, the company's water supply business focuses on improving operation, the gap between production and marketing is declining rapidly, cost control is effective, and the performance growth rate affected by the epidemic in 2020 has gradually recovered. At the same time, the reform of the water price mechanism defines the incentive direction of "high quality and high price", which is expected to drive the price by operation and improve the revenue of water supply.
Sufficient reserves have been put into operation one after another, and waste incineration lights up the future of solid waste. After the development and accumulation during the 13th five-year Plan period, the company took domestic waste as the main line and formed the solid waste business layout with incineration as the core. There are 73 reserve projects with a total treatment capacity of 1372 million tons per year. Among them, the municipal solid waste incineration project 2020-2021H1 has an incineration capacity of 9500 tons / day, and more than 10,000 tons / day capacity is planned to be put into production within 2 years. The incineration operation has been carried out smoothly, and the online electricity consumption has increased to 610 million kilowatt-hours in 2020. The power generation per ton of garbage and the proportion of online electricity generation are in the forefront of the industry, and the solid waste business is expected to enter a period of rapid growth during the 14th five-year Plan period.
REITs invigorates existing assets, and operations inject potential into valuations. In June 2021, the company successfully launched the rich country's first REIT product, which is the only sewage asset product among the 9 first pilot projects. While invigorating the stock assets, the issuance of REITs can also reflect the market's re-evaluation of the value of the stock assets based on the level of management and operation. According to the valuation of Wells Fargo's first REIT, it is estimated that the production capacity of the holding company of the company can be estimated to be up to 21.35 billion yuan, and the management operation has great potential to improve the valuation of the company.
Investment advice:
We predict that the company's operating income from 2021 to 2023 will be 24.3 billion yuan, 31.1 billion yuan and 38.7 billion yuan, and the net profit will be 2.29 billion yuan, 2.35 billion yuan and 2.998 billion yuan. The corresponding PE is 11.14, 10.8 and 8.52 respectively. Cover the company for the first time, giving a "buy" rating.
Risk hint: project promotion is not as good as expected risk, water price adjustment lags behind risk, industry policy is less than expected risk.