1H22's home net profit is + 18% compared with the same period last year, and the business operation is sound.
Xingrong Environmental release report: 1H22 achieved revenue of 3.16 billion yuan, year-on-year + 13%, return to the mother net profit of 840 million yuan, year-on-year + 18%, equivalent to our annual forecast of 49% Ting 2Q22 revenue of 1.72 billion yuan, year-on-year + 8%, return to the mother net profit of 490 million yuan, year-on-year + 18%. The income of water supply has increased steadily, the volume and price of sewage treatment have risen, and the potential scale of environmental protection is considerable. To maintain the profit forecast, the net profit for 22-24 is estimated to be 1.971 million yuan for 17.19, 18.75, 0.63 and 10% for EPS, 0.58 and CAGR respectively. 22-year comparable PE average 10x, the company's main operating areas of the continuous inflow of population, business growth expectations are clear, given the 22-year target PE 10x, the target price of 5.8yuan, maintain the overweight rating.
Water supply: the incremental scale of the project under construction is large, and the revenue in 22-24 is expected to increase steadily. The company disclosed that the operation of the water supply project at the end of June and the scale under construction is about 4.18 million tons / day, of which the third phase of Chengdu No. 7 Plant under construction is 800,000 tons / day. The scale of water supply operation will be significantly increased after it is put into production. 1H22's water supply revenue is + 4% year-on-year, mainly due to increased capacity utilization; pipe network project revenue is-38% year-on-year, mainly due to the reduction of stock projects. With the commissioning of the new project and capacity climbing, we estimate that the water supply revenue in 22-24 will be 2.84 billion yuan, and the pipe network project revenue will be 1.16 billion yuan.
Sewage treatment: the new plant was put into operation and superimposed bid raising transformation, and the company revealed that at the end of June, the sewage treatment project operation and construction scale was about 4.35 million tons / day, and the reclaimed water utilization project operation and construction scale was 1.2million tons / day. 1H22 sewage treatment revenue is + 36% year-on-year, and gross profit margin is + 1.6pp to 42.0% year-on-year, thanks to the increase in treatment unit price brought about by bid raising and transformation. With the continuous commissioning of projects under construction, we estimate that the revenue from sewage treatment in 22-24 will be RMB 2.78 billion.
Environmental protection: the potential scale is considerable, and the 22-24 revenue is expected to grow rapidly. The company disclosed that at the end of June, the operation scale of garbage incineration power generation reached 6900 tons / day, and the scale of construction and proposed construction was 7500 tons / day; the operation scale of landfill leachate treatment was 5630 tons / day, the scale of under construction and proposed construction was 2600 tons / day, the 21-year treatment unit price was + 59% compared with the same period last year; the operating scale of sludge disposal was 1516 tons / day, and the scale of construction and proposed construction was 1884 tons / day. 1H22 garbage power generation revenue + 5% year-on-year, landfill leachate treatment revenue + 49%, thanks to the increase in treatment unit price. Taking into account the capacity climbing, we estimate that the revenue from garbage power generation and landfill leachate treatment in 22-24 will be RMB 580 million and RMB 5.8 million respectively.
The valuation is at the bottom of history, maintaining the overweight rating.
The company's current share price, which corresponds to the 22-24 9.0/8.2/7.8xPE, is a slight correction from the end of April, but is still at the bottom of the decade. The average PE of the comparable company in 22 years is 10x (Wind consensus expectation).
Considering the continuous inflow of population in Chengdu, the main operating area of the company, and the clear expectation of business growth, the company is given a target of 10x PE for 22 years, with a target price of 5.8yuan and an overweight rating.
Risk hint: the risk of electricity price reduction of waste incineration power generation; the project production schedule is not as expected.