The net profit is basically in line with Huatai's expectations, reiterating the "buy" rating.
Green Power recorded revenue / return net profit of RMB 5.06 billion / 698 million in 2021, an increase of 122% and 39% over the same period last year, and its net profit was lower than our expectation of 9% (Huatai expectation: RMB 766 million).
Based on the improvement of the company's operational efficiency and the fact that the new capacity of the garbage power generation project is lower than we expected, we raised the forecast of the company's electricity generation per ton of waste and lowered the forecast of the new capacity. Furthermore, we adjusted the 2022max 2023 net profit forecast to RMB 1.004 billion / 1.141 billion (previous value: RMB 984 million / 1.218 billion), and introduced the forecast of RMB 1.242 billion in 2024. Corresponding to the forecast EPS of RMB 0.72 and 0.82 in 2024 for 2022 and 2023. Based on the 7.5x 2022 forecast PE, our target price for Green Power H shares (1330 HK) is HK $6.67 (previous target price: HK $6.69), reiterating "buy".
Rating. For Green Power A shares (601330 CH), based on 15 times the 2022 forecast PE, our target price is RMB10.80 (previous target price: RMB13.20), reiterating the "buy" rating.
High quality growth will be maintained in 2022
Green Power's revenue in 2021 increased 122% year-on-year to 5.06 billion yuan (previous value: 2.28 billion yuan), mainly due to: 1) incremental transportation projects; 2) improved operational efficiency; 3) confirmed BOT construction income of 2.43 billion yuan. As of December 31, 2021, Green Power has operated 31 waste incineration power generation projects (with a waste disposal capacity of 30,000 tons per day and an installed capacity of 699.5 megawatts), of which 5 are under construction. Taking into account the construction progress of the green power project, we believe that the company's new capacity will maintain 10% growth in 2022-2023.
The operation efficiency of garbage power generation is a new high.
In 2021, Green Power completed a total of 10.5 million tons of domestic waste disposal (an increase of 18% over the same period last year) and power supply of 3.33 billion kilowatt hours (an increase of 22% over the same period last year). According to the amount of garbage entering the plant, the online electricity per ton of garbage is 316kWh (up 4% year on year). The highest efficiency in history. The gross margin of BOT construction services is low (8 per cent), dragging down the company's gross profit margin to 34 per cent (previous value: 58 per cent), but we expect that BOT construction services as a share of revenue will fall from 48 per cent in 2021 to 38 per cent in 2022, when gross profit margin is expected to rise to 42 per cent.
Achieve diversified income through kitchen / heating business
In the face of the situation of the national subsidy and retrograde policy of waste incineration and power generation and the development of waste classification, Green Power is extending to solid waste collaborative services, including kitchen waste treatment and heating business. According to the company's 2021 annual report, Green Power has eight kitchen waste disposal projects and five heating projects, supplying 139500 tons of steam in 2021, further enriching the company's source of income.
Risk tips: 1) the climbing speed of the project is slower than we expected; 2) the subsidy policy for companies in the waste power generation industry is lower than we expected.