Events:
In 2016, the operating income and return net profit of H1 Company were 1.619 billion yuan and 58 million yuan respectively, with operating income down 6.72% year on year, and return net profit decreased 74.67% year on year, in line with expectations.
Main points of investment:
The company reported results in 2016 in line with expectations. In the first half of the year, the company's operating income was 1.619 billion yuan, down 6.72% from the same period last year, and its net profit was 58 million yuan, down 74.67% from the same period last year, in line with expectations. The main reason for the decline in operating income compared with the same period last year is that due to the influence of the national macroeconomic policy, the number of hours of thermal power utilization continues to decline, coupled with the increase in hydropower generation in half a year to squeeze thermal power generation, resulting in a decline of 11.89% of the company's desulphurization and denitrification franchise business revenue during the reporting period (revenue of 626 million yuan, accounting for 38.7% of the total operating income). At the same time, the business income of denitrification catalysts decreased by 32.44% compared with the same period last year due to the market downturn (operating income of 60 million yuan, accounting for 3.7% of the company's total operating income). The net profit of homing decreased significantly (74.67%) compared with the same period last year, mainly because the company made a profit of 165 million yuan by reducing its holdings of 7.45 million shares of Southwest Securities in the same period last year, but this did not happen in the 2016 H1 period. excluding the impact, net profit fell 5.48% year-on-year, the same as income growth, in line with expectations.
To promote the water business, the group environmental protection platform pattern is emerging. The training of the power plant water treatment project and the implementation of Erlang's first power plant "water island" demonstration project have doubled the company's water integration service capacity. The company set up Chongqing Yuanda Water Co., Ltd. The water treatment contract in Beipiao City reflects the rapid response of the company's new management to the strategic objectives of water development, and contracts for the future expansion of Chaoyang and Lingyuan projects are expected. In addition, in the future, the company is expected to take advantage of the platform resources to carry out catalyst recovery and disposal business and enter the field of hazardous waste treatment.
The company enters the field of hazardous waste disposal through catalyst treatment and opens up the development space of the company. The wholly-owned subsidiary of the company cooperates with New Zhongtian Environmental Protection in the form of cross-shareholding. New Zhongtian Environmental Protection is a local hazardous waste treatment company in Chongqing, with a complete industrial chain of hazardous waste disposal, the supporting unit of the National Environmental Protection and Hazardous waste disposal Engineering and Technology (Chongqing) Center, and the holding subsidiary Zhongtian Electric waste enjoys WEEE fund subsidies, which has complementary advantages with the catalyst subsidiary in hazardous waste treatment. Among the two projects in this cooperation: the hazardous waste centralized incineration project, the China Power Yuanda Catalyst Company plans to contribute 22.5 million yuan, holding 45% of the shares, and Zhongtian 55%; the registered capital of the waste catalyst treatment project is 20 million yuan, which is still in the early stage. Up to 45% of the shares will be transferred to Zhongtian in accordance with the provisions of the transfer of state-owned property rights, and then Yuanda Catalyst Company still holds 55% of the project. Yuanda enters the hazardous waste industry through catalyst treatment, which is in line with the company's development plan, completes the catalyst life cycle industrial chain for the company, and opens up the company's development space.
The first listing platform of domestic nuclear environmental protection is worth looking forward to. The company is one of the only three enterprises with medium and low level nuclear waste disposal license in China, and it is also the first company to undertake nuclear power plant off-reactor nuclear waste disposal project by EP. Relying on the implementation of the SRTF project of Shandong Haiyang Nuclear Power Station, the company is beginning to have the capability of full-process nuclear environmental protection services, and is expected to achieve performance growth in the field of nuclear waste disposal.
Investment rating and valuation: considering that the company's traditional atmospheric business has entered a downward period this year and the new business has not yet taken shape, we downgrade the company for 16-17 years and give a 18-year net profit of 1.44,1.77 and 213 million yuan (originally 3.17 yuan and 347 million yuan for 16-17 years). The corresponding EPS is 0.18,0.23,0.27 yuan per share, corresponding to 73 times PE in 16 years. Downgrade to "overweight" rating.