Events:

The company released 17-year results KuaiBao. During the reporting period, the company achieved revenue of 2.06 billion yuan, an increase of 22.29% over the same period last year, and net profit of 363 million yuan, an increase of 38.58% over the same period last year, which was lower than expected.

Main points of investment:

During the reporting period, there was a significant boost in the company's two major businesses and an improvement in profitability. Among them, 1. Huizhou Icos C 5 / C 9 separation and comprehensive utilization EPC project equipment supply, project construction and other smooth progress, the project construction and installation has been basically completed, the company's net profit has been greatly improved; 2. Due to the smooth development of the market, the net profit of Jilin solid waste treatment Co., Ltd., a wholly owned subsidiary, has been greatly improved. Two key projects promote the improvement of the company's performance and high growth possibility. In addition, the increase in gross profit margin during the company's reporting period drove a weighted average ROE growth of 0.70%. However, some businesses were shut down by supervision and inspection, affecting the performance of the current period, and the final impairment was slightly lower than expected of 390 million yuan.

High-quality and dangerous license plate, looking forward to the production capacity landing. The comprehensive disposal license of 42 kinds of wastes in Jinghua radiates all over Heilongjiang Province, and the annual output of hazardous waste in the province will reach 1.04 million tons by 2020. The first phase of the project is under construction, with an annual comprehensive disposal scale of about 83900 tons, which is expected to be completed and put into production in May 19. It is estimated by the company that the net profit of the hazardous waste project will reach 70.99 million yuan / year after reaching production. The qualification of Jilin solid waste license, a wholly owned subsidiary of the company: physical and chemical 8000 tons, incineration 10, 000 tons (including medical waste), landfill 110000 tons. At the same time, the largest hazardous waste landfill in the three northeastern provinces (the only dangerous waste landfill in Jilin Province) is under construction, with a storage capacity of 1.4 million square meters, which is extremely scarce. And in 16 years, the company acquired 51% of the holding shares of Taiyuan Oil, and laid out the market of oil-based drilling cuttings and sludge disposal in advance, which will coordinate with the company's deep petrochemical resources.

The treatment of the Black stinky River is the focus of the 13th five-year Plan, and the company has obvious first-mover advantages. The Action Plan for the Prevention and Control of Water pollution proposes that "the built areas of municipalities directly under the Central Government, provincial capitals and cities separately listed on the State plan should basically eliminate the black and smelly water body by the end of 2017." it is estimated that the national market space will be about 100 billion by the end of 2020. Through the acquisition of beyond science and technology to cut into the black stinky river treatment, the company has the core technology such as biological enzyme treatment, efficient flocculation technology and sediment rapid desilting and drying technology, combined with microbial enzyme technology, can carry out systematic mud-water co-treatment of large-scale river. At present, demonstration projects for the treatment of Heidi River have been carried out in Shanghai, Changshu, Hangzhou and other places with remarkable results. We expect the company to benefit greatly from the approaching Black Stinky River assessment and tighter regulation.

The rigid demand for waste acid disposal has sufficient market space and obvious thickening of performance. The waste acid is treated as a rigid demand, and the total amount is huge. According to the statistics of China Chemical Industry Information Center, China produces more than 100 million tons of industrial waste acid every year. According to the national annual metal processing and pickling production of 20 million tons of waste hydrochloric acid, it is calculated that the future corresponding investment demand is 10 billion, and the operating space is 10 billion / year. There are nine major scrap processing bases in China, with a scrap capacity of more than 3000 tons per day, which is expected to give priority to the release of demand. The company's resource technology is in line with the trend of environmental protection. In the first three years after the first phase was put into production, the annual net profit was 13.4821 million, and the performance increased significantly.

Holding petrochemical tailing seam market leader, put into production at the end of 2017, for the future performance growth point. When the first phase of Huizhou Ecos project is completed at the end of November 17, it will become the largest C5 separation project in the country (with an annual raw material processing capacity of 300000 tons). C5 raw materials are scarce. It is estimated that the total amount of C5 raw materials in the country is no more than 1.8 million tons, and Icos's first phase accounts for 300000 tons, accounting for 17%, which is the largest comprehensive utilization project in Asia. And after the completion of the second phase of Ecos, the deep processing capacity of C5/C9 will be formed. the main products are high-end resins such as DCPD hydrogenated resin and C-9 hydrogenated resin, which have a wide range of applications. The company has become the largest shareholder by 45% of Huizhou Ecos in 16 years, and it is expected that the commissioning of the project will greatly improve the company's profit level.

Profit forecast and investment advice: combined with the performance forecast, we slightly downgrade the 17-19 net profit forecast to 3.63,6.78 and 892 million (originally from 17 years 3.9,6.99,1.083 billion), corresponding to 40 times and 21 times PE for 17 and 18 years, the performance inflection point is clear, the order release is accelerated and the "buy" rating is maintained.