Incident Overview
On March 27, the company announced its 2022 annual results announcement. In 2022, the company achieved operating income of 7.886 billion yuan, +18% year on year; net profit from continuing operations was 3.852 billion yuan, -44% year on year; of these, net profit from continuing operations to the mother was 915 million yuan, +23% year on year.
In 22H2, the company achieved operating income of 4,072 billion yuan, +25% year-on-year, +6% year-on-year; Guimu's net profit was 1,423 million yuan, -62% year-on-year, and -41% month-on-month; among them, Gimu's net profit from continuing to operate its main business was 373 million yuan, +33% year-on-year, +33% year-on-year, -31% month-on-month.
Analysis and judgment
The company's waste-to-energy projects have been put into operation, and profitability has been improved. In 2022, the company's garbage disposal revenue was 6.5561 billion yuan, +14% year on year; of this, garbage disposal operating revenue was 2,676 billion yuan, +113% year on year. The main reason was that 14 garbage disposal projects were put into operation and 11 garbage disposal projects were acquired during the year. In 2022, the company's gross margin was 28.2%, +3.6pct over the previous year. The main reason for the increase in gross margin was: 1) the company's waste-to-power generation projects increased, the share of operating revenue increased by 3.7pct to 27.5%; 2) the company's energy-saving equipment business strengthened cost control, and gross margin increased 6.4 pct to 27.2%.
The company has accelerated its entry into the new energy circuit, bringing broad room for imagination. The company has signed a contract for a 500,000 ton LFP cathode material project and a 200,000 ton anode material project. The first phase of the company's LFP cathode material project with an annual output of 50,000 tons was put into operation in September 2022, and trial sales have already been achieved; the first phase of the project with an annual output of 40,000 tons of anode materials is underway; in 2022, the company achieved revenue of 5.734 million yuan from the new energy materials business. In addition, the company made full use of cement kiln resources to carry out lithium battery recycling business. In 2022, the company's 5,000 tons/year resource recycling project was put into operation, and three lithium battery recycling projects were signed, with a total disposal scale of 45,000 tons/year.
Investment advice
The company's total revenue for 2023-2025 is estimated to be 11.743 billion yuan, 15.280 billion yuan and 19.03 billion yuan respectively, +49%, +30%, and +24%, respectively; the net profit of the mother is 48.37, 57.89 and 6.996 billion yuan respectively, +26%, +20%, and +21%, respectively. The current stock price corresponds to 2023-2025 PE by 5, 4, and 3 times, respectively. The company has accelerated its entry into the new energy business. Compared with companies in the environmental protection and new energy materials industry, it is undervalued and maintains a “buy” rating.
Risk warning
The company's production capacity fell short of expectations, customer verification fell short of expectations, the price of LFP cathode materials fell faster than expected, and the construction speed of garbage disposal projects was lower than expected