Event: the company announced its annual results in 2021, with operating income of HK $4.45 billion in 2021, an increase of 26.42% over the same period last year, and a net profit of HK $502 million, an increase of 17.62% over the same period last year. Excluding VAT and other concessions related to the epidemic, the company realized a net profit of HK $477 million, an increase of 55.7% over the same period last year, and proposed to pay a final dividend of 3 Hong Kong cents per share.
The sanitation gross profit margin increased steadily (excluding the impact of the epidemic), and the scale of harmless treatment of hazardous waste increased rapidly.
Sanitation sector: 23 new sanitation projects signed by the company in 2021, with an annual contract value of HK $540 million, 8 projects terminated with an annual contract value of about HK $41 million, and a total of 128 projects at the end of 2021, with an annual contract value of about HK $3.98 billion. The company's sanitation sector achieved operating revenue of HK $3.402 billion in 2021, an increase of 20.60% over the same period last year; gross profit margin decreased by 3.54 pct to 25.93% year-on-year (excluding VAT and other deductions related to the epidemic, gross profit margin increased by 0.5% to 25.1%).
Hazardous waste plate: the production capacity of the newly launched Yichang Yaojiagang and Shandong Industrial solid waste disposal Center projects climbed smoothly, and the harmless disposal capacity increased significantly by 87.0% to 205000 tons in 2021 compared with the same period last year. The unit price of hazardous waste harmless treatment continued to decline in the context of intensified competition, and the average unit price of harmless treatment fell 15.7% to 2171 Hong Kong dollars / ton compared with the same period last year, driving the gross profit margin of the harmless disposal business down 8.6 pct to 37.5% year on year. Against the backdrop of rising commodity prices, the company's average unit price for resource disposal rose 57.0 per cent year-on-year to 4431 Hong Kong dollars / tonne, but the corresponding sharp increase in procurement costs reduced gross profit margin by 11.3 pct to 22.6 per cent year-on-year.
Through the "three" empowering deep ploughing of the urban service market, clear resources into the key development direction of hazardous waste.
The company will continue to cultivate the urban service market through the "Great Sanitation, Integration" project, strengthening responsibility, and lean digital enabling industry transformation. Combine mechanization, intelligence, digitization to promote equipment upgrading and strengthen the company's core competitiveness, and strive to achieve a 10% market share level. In addition, hazardous waste disposal is an important part of waste-free city construction, and the company will continue to promote the smooth climbing of trial operation projects (4 harmless projects with a capacity of 88650 tons / year) to ensure steady growth in performance. at the same time, the company will strengthen the development of resource projects and make clear the key development direction in the future.
Maintain the "buy" rating: according to the company's sanitation project order planning and hazardous waste project production progress, we slightly raised the company's 22-23 profit forecast and added 24-year profit forecast. The company's 22-24 net profit is expected to be 5.96pm 707 billion HK $812 million (up 4% / 0.3% / new), respectively. The current stock price corresponds to 22-24 PE, which is twice as much as 4-3-3. The company has a strong sanitation bill at the beginning of 2022, and in the long run, we continue to be optimistic about the advantages of cost control, integrated layout and government relations to ensure the improvement of the scale of the company's sanitation projects. at the same time, the performance of the hazardous waste sector will maintain steady growth with the gradual commissioning of the project, taking into account the company's performance growth, future valuation and other two factors to maintain the "buy" rating.
Risk tips: increased competition in the sanitation market led to new orders and profitability less than expected; hazardous waste projects put into production and disposal prices are not as expected; the goodwill risk brought by M & An and so on.