Main points of investment:
Waste mineral oil disposal starts with high gross profit margin and good cash flow. The company has been engaged in the collection and disposal of hazardous wastes such as waste mineral oil for nearly 20 years, and has built a recycling chain system of hazardous waste "collection-transportation-storage-utilization-disposal". It has a production capacity of 30,000 tons / year of waste mineral oil when it was listed in September 2021, and has established a stable cooperative relationship with nearly 4000 waste units in Zhejiang Province by the end of 2021. The company plans to use 74 million yuan to expand the production of 30, 000 tons / year waste mineral oil comprehensive utilization project, after landing, the production capacity will be increased to 60, 000 tons / year. Waste mineral oil comprehensive utilization products are mainly lube base oil, when sold to downstream enterprises, cash spot, good cash flow; at the same time, the project gross profit margin is high, 51.28% in 2021.
Deep ploughing waste power disassembly business for many years, the scale is leading in Zhejiang Province, it is proposed to acquire Tiger Brother Environment to deepen the business layout. Shengtang Environmental Protection, a subsidiary of the company, is one of the "first batch of subsidized enterprises for the disposal of waste electrical and electronic products" in China. There are only five designated disposal enterprises of waste electrical and electronic products in Zhejiang Province. The number of "four machines and one brain" was 5.8285 million in 2021, accounting for 30.6% of the number of public dismantles in Zhejiang Province that year, ranking first in Zhejiang Province. In January 2022, the company announced that it intends to acquire Tiger Environment, a domestic waste recycling enterprise, which, on the one hand, will help to enrich the business sources and customer resources of the company's B side, and on the other hand, it can help the company extend its business to C side and G side.
The proposed acquisition of Tiger Environment: the business model is unique and can be expanded widely. Tiger's environmental income comes from three parts: 1) garbage sorting and recycling service fee on the To G side: providing door-to-door recycling service, which greatly improves the residents' convenience of life and their enthusiasm to participate in garbage sorting; 2) the fine disassembly and recycling income of waste materials on the ToB side: the category of recycling is not limited to waste household appliances, but "due and collected" for recyclables, large pieces of garbage and harmful waste. At the same time, the disassembly utilization rate reached more than 95% to ensure the profitability of the project; 3) the income earned by the residents of the C side of To using the "environmental protection fund" to consume in Tiger Mall. Three parts of income jointly guarantee the profitability of the project. In 2020, the non-net interest rate deducted by Tiger Environment is 15% and 19% respectively in 2021.
As of June 2022, Tiger Environment served a total of 788000 households, an increase of 87.35% from 42.06 million households in 2020. According to the seventh census data released by the Zhejiang Provincial Bureau of Statistics, the number of households in Zhejiang Province will be 17.6471 million in 2021, more than 20 times the current number of Huge environmental service households, and there is broad room for expansion.
Profit forecast and investment rating we believe that the company's waste mineral oil business is profitable, and the e-waste disassembly business has a competitive advantage in Zhejiang Province. out of the principle of prudence, the impact of Tiger Environmental acquisition on the company is not considered for the time being. It is estimated that the company's net profit in 2022, 2023, and 2024 will be 0.61, 0.80, respectively, 90 million yuan, corresponding to PE, respectively, in 33-26-23, covering for the first time and giving "overweight" rating.
The risk indicates that the progress of project expansion is not as expected; the risk of untimely payment of subsidies; the risk of impairment of accounts receivable; the lower-than-expected progress of acquisition; and the risk of decline in gross profit margin caused by commodity price fluctuations.
