High-quality leader in waste incineration power generation industry, profitability is expected to improve Green Dynamics announced on August 30 that 1H22 income / return net profit is RMB 2.2610 billion, down 9.7% compared with the same period last year. We estimate RMB 0.62 for EPS 0.68 for 22-24.
For Green Power H shares (1330 HK), in view of its low liquidity in the Hong Kong stock market, we give Green Power H shares 8.4x 2022EPE (comparable company Wind consensus expected average 12.0x 2022EPE), corresponding to a target price of HK $5.92 (previous value: HK $6.67), reiterating "buy". For Green Power A shares (601330 CH), in view of the company's abundant hand capacity and the potential stable profit growth brought about by the continuous launch of new projects, we give Green Power A shares 16.8 x 2022e PE (comparable company Wind consensus expected average of 12.0x 2022E PE), corresponding to a target price of RMB10.42 (previous value: RMB10.80) to reiterate "buy".
Construction sector revenue decline, the new waste incineration power generation project began to operate 1H22 revenue decline with the construction sector revenue. Affected by the epidemic, the number and scale of projects under construction declined, and the progress of construction slowed down. Revenue from the construction sector reached 892 million yuan, down 28.9 percent from the same period last year. Operating income accounted for 52.0% of the total income, an increase of 9.4% to 1.18 billion yuan over the same period last year, mainly driven by projects under construction in Huizhou Phase II, Dengfeng, Sands and Laizhou. According to the interim report, management plans to promote the operation of projects in Huludao, Shuozhou and Enshi at 2H22. We think these projects will bring considerable profits to the company.
The amount of electricity connected to the Internet is increasing steadily, and the comprehensive gross profit margin is expected to increase.
In the first half of the year, Green Power handled 5.5 million tons of domestic waste, an increase of 8.3 percent over the same period last year, and the electricity consumption on the Internet was 1.69 billion kilowatt-hours, an increase of 4.8 percent over the same period last year. Due to the increase in the proportion of operating income, the comprehensive gross profit margin rose 1.8 percentage points to 36.0%, while the operating gross profit margin fell 4 percentage points to 54% compared with the same period last year. Considering that the proportion of BOT construction services revenue may fall to 35.2% (2021: 48.0%), we expect the consolidated gross profit margin to be 43.3% (2021: 34.2%) in 2022. The company's Ninghe kitchen waste, Jizhou kitchen waste and Huizhou three-in-one project have been basically completed and put into production, supplying 140000 tons of steam in the first half of the year, an increase of 212.0% over the same period last year. Kitchen waste and heating business will further promote income diversification and promote high-quality growth.
Lower the forecast of net profit of homing for 22-24 years
The capacity climbing speed of the project that the company put into production in 2021 is slower than expected, the operating cost rises, and the epidemic affects the construction progress, so we downgrade the forecast of capacity utilization and the scale of the project under construction, raise the operating cost assumption, and then lower the 22-24 net profit forecast of homing to RMB 8.69 Mab 9.42 billion (previous value: RMB 10.04 shock 11.41 billion). Corresponding to RMB 0.62 for EPS in 22-24, 0.68 for RMB 0.73.
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.