Main points of investment
The "overweight" rating for the first time is expected to be a critical point for the company to get out of the trough this year, and we recommend that investors pay attention to positive changes in the company's core fundamentals. Recently, the company has significantly accelerated the acquisition of new projects, and the future strategy of solid and waste integration has become increasingly clear. the injection of New Zealand assets will significantly enhance the company's profitability and promote domestic business development through the spillover effects of technology and management. Taking into account the intermediary fees and consolidation of overseas acquisitions and other factors, short-term performance may be variable, do not set the target price for the time being.
Pioneering Environment is the only solid waste listing platform under Beijing State-owned Capital Innovation Group. Over the years, the company has made a layout around the vertical integration of the solid waste industry, and has become the first solid waste enterprise in China to open up the whole industry chain. After the injection of New Zealand assets, it is expected to increase the company's net profit by about HK $200 million, a significant increase in profitability. Its advanced integrated management model will form a spillover effect on domestic business and speed up the arrival of the inflection point of operation. Recently, the company has significantly accelerated the acquisition of new projects, and positive changes are taking place in the core fundamentals.
The market space of municipal solid waste disposal is large, and there are many opportunities in the whole industry chain. The process of urbanization in China has given rise to a large number of domestic waste disposal demand. with the growth of urban population and the increase of garbage per capita, it is estimated that the total amount of domestic waste will reach 310 million tons by 2020, and the value of the whole operating industry chain will reach more than 62 billion yuan.
Solid waste industry chain layout is the most complete, to create a first-class integrated solid waste platform. The pioneering environment has taken the lead in launching the management model of solid and waste integration in China, and has gradually realized marketization. This model accurately aims at the demand gap of small and medium-sized cities and towns and has a good development prospect. With the support of major shareholders, the company has obvious advantages in capital and project. After the injection of New Zealand assets, with its advanced operation mode and brand awareness, it is expected to become the leader in the domestic solid waste integration market.
Operating inflection point in 2016, undervaluation has a good margin of safety. 2016 is a double inflection point for the company's performance and strategy, with a major shareholder share price of HK $0.4, a premium of 35.6% to the current share price, with a good margin of safety.
Risk Tip: the new project falls short of expectations, and the RMB and New Zealand dollar depreciate against the Hong Kong dollar.
