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兴蓉环境(000598):业绩符合预期 水务与环保稳健发展

Xing Rong Environment (000598): Performance is in line with expectations, steady development of water and environmental protection

華泰證券 ·  Apr 26, 2023 00:00  · Researches

Net profit of Gimu in 2022 was +8% year on year, and the target price was raised to 6.1 yuan/share Xing Rong Environment released results: 2022 achieved revenue of 7.63 billion yuan, +13% year on year, and net profit of Gimu was 1.62 billion yuan, +8% year on year, consistent with the performance report; 4Q22 revenue was 2.69 billion yuan, +22% year on year, and Guimu's net profit was 240 million yuan, -5% year on year. Higher costs have led to a decline in the gross margin of water supply, a sharp rise in the volume and price of sewage treatment, and the potential scale of environmental protection is considerable. Taking into account segmental revenue and gross margin adjustments, the net profit forecast for 23-25 was updated to 18.29/20.27/2.194 billion yuan (previous value of 1,885/1,971 billion yuan), EPS 0.61/0.68/0.73 yuan, and three-year CAGR 11%. The company's current stock price corresponds to 8.3/7.5/6.9xPE in 23-25, and the average value of comparable PE in '23 is 10x. The company's population continues to flow in from its main operating regions, and business growth expectations are clear. The target PE for 23 was given 10x, with a target price of 6.1 yuan (previous value of 5.8 yuan was based on 10x 22E PE), maintaining the increase in holdings rating.

Water supply: Higher costs have led to a decline in gross margin. The company revealed that the water supply project was operated and under construction at the end of '22 was about 4.1 million tons/day (1H22:4.18 million tons/day). Among them, the third phase of Chengdu Plant 7 had a production capacity of 400,000 tons/day, and will significantly increase the scale of water supply operation after it is put into operation. The company's water supply revenue in '22 was +3% year on year, thanks to the increase in water supply capacity and the average water price increase of about 2 minutes/ton year on year; gross margin was -4.0 pp to 44.3% year on year, mainly because the rate of increase in raw material costs exceeded revenue growth. Pipeline network project revenue was +11% year on year, reversing the year-on-year decline in the first half of the year. The effect of catching up with project progress was remarkable. As new projects are put into operation and production capacity climbs, we expect water supply revenue to be 24.2/266/28.1 billion yuan in 23-25, and revenue from pipeline network projects of 11.3/11.9/1.25 billion yuan.

Sewage treatment: The new plant was put into operation and upgraded, and the sector faced a sharp rise in volume and price. The company revealed that the sewage treatment project operation and construction scale at the end of '22 was about 4.5 million tons/day (1H22:4.35 million tons/day), and the operation and construction scale of the reclaimed water utilization project was 1.02 million tons/day. Sewage treatment revenue in '22 was +21% year on year, thanks to sewage treatment volume +6% year on year and treatment unit price +14% year on year due to upgrading and transformation; gross margin was -0.9 pp to 38.5% year on year, mainly due to high increases in energy and depreciation costs. As projects under construction are put into operation one after another, we expect sewage treatment revenue of 29.3/32.4/3.57 billion yuan in 23-25.

Environmental protection: The potential scale is considerable, and new food waste disposal projects have been added

The company disclosed that at the end of '22, the operating scale of waste incineration power generation reached 6,900 tons/day, and the scale under construction and proposed was 7,500 tons/day; the operating scale of garbage leachate treatment was 5,630 tons/day, the scale of construction and proposed construction was 2,800 tons/day; the scale of sludge disposal operation was 1,516 tons/day, and the scale under construction and proposed construction was 1,884 tons/day. Waste incineration power generation revenue in '22 was +18% year on year; revenue from garbage leachate treatment was +7% year on year, thanks to the unit price of disposal +8% compared to the same period last year. In '22, the company added a number of food waste disposal projects, and the environmental protection segment was further expanded. Considering the rise in production capacity, we expect waste incineration power generation revenue of 58/68/780 million yuan and garbage leachate treatment revenue of 51/54/570 million yuan in 23-25.

Risk warning: Risk of lower electricity prices for waste incineration power generation; project commissioning progress falls short of expectations.

The translation is provided by third-party software.


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