3Q22 operating income / homing net profit year-on-year + 4.0% Mercer 13.8%
Chengfa Environment 1-3Q22 operating income / return net profit is 4233,831 million yuan, compared with the same period last year, + 18.1% Universe 9.8% Asset 3Q22 operating income / return net profit 1479Universe 249 million, year-on-year + 4.0% Compay 13.8%. We believe that the decline in 3Q22 return net profit may be due to the decline in revenue from environmental protection projects due to the reduction of the scale of projects under construction and the high base in the same period last year. According to the progress of the project under construction and the operation of solid waste, we reduce the project revenue, operation and gross profit margin of the project, and estimate the return net profit of 11.22 yuan 12.41 / 1.358 billion yuan in 22-24 years (previous value: 1.252 pound 13.37 billion yuan), referring to the PE average value of Wind consensus forecast of solid waste treatment / highway comparable company in 2022, considering that the waste incineration market in Henan Province tends to be saturated. There is some uncertainty in the expansion of non-provincial and overseas projects. Solid waste treatment / road traffic will be given PE 8.3x/8.2x in 2022, corresponding to the target price of 14.43 yuan (the previous value is 15.45 yuan) and PE 8.3x in 2022, maintaining the "buy" rating.
We will promote the construction of solid waste and water assets, build a high-quality environmental protection investment and operation platform backed by Henan Investment Group, and Chengfa environment will continue to promote the construction of solid waste and water assets. According to the October 2022 announcement of Chengfa Environment (Ref.: 2022-089), the company signed a "Strategic Cooperation Agreement" with Zhengzhou Airport Investment Holdings Group Co., Ltd. the two sides plan to cooperate in the construction of vein industrial park in the airport experimental zone, construction waste resource disposal project, east transfer storage pool and supporting projects, and deepen cooperation in the fields of medical hazardous waste resource utilization, urban comprehensive operation and clean energy. Under the guidance of internationalization, technological innovation and capital operation, the company is expected to build a high-quality environmental protection investment and operation platform.
Expand the solid waste industry chain, Chengfa's new sanitation has a strong order.
The company actively expand the solid waste industry chain, through the wholly-owned subsidiary Chengfa New Sanitation to carry out sanitation business. As of June 2022, Chengfa New Sanitation has operated 16 environmental sanitation service projects, with a total contract value of 2 billion yuan.
In September, the company won the bid for rural domestic waste removal and transportation project in Wuyang County / Neihuang County / Xihua County, with service periods of 25-15-8 respectively, of which the total contract amount / annualized amount of the project in Neihuang County reached 203 million yuan / 14.5 million yuan. We believe that the expansion of sanitation business will help the company to promote the integration of solid waste industry chain, improve the garbage collection and transportation system, and improve the efficiency of waste incineration.
Maintain a "buy" rating with a target price of 14.43 yuan
We estimate that the net profit of solid waste treatment / road return in 2022 is 645,477 million yuan. Reference to solid waste treatment / highway comparable company 2022 Wind consensus forecast PE mean 10.4x/8.2x, considering that the waste incineration market in Henan Province tends to be saturated, there is some uncertainty in the expansion of non-provincial and overseas projects, solid waste treatment / road traffic 2022 PE 8.3x/8.2x Corresponding to the target price of 14.43 yuan (the previous value of 15.45 yuan), corresponding to PE 8.3x in 2022, maintaining the "buy" rating.
Risk hint: waste incineration project operation risk, operation efficiency improvement is not as expected, project revenue decline is more than expected.