The company is actively promoting the construction of a recycling system and increasing the amount of recycled lead. The company gradually radiated the traditional recycling range of lead-acid batteries from Henan, Sichuan, Zhejiang, and Shanghai to places such as Shaanxi, Shandong, and Jiangsu, adding more than 50 new partners. In 2017, it completed the procurement of 176,000 metal tons of waste lead-acid batteries and 35,000 metal tons of copper scrap. In the future, the company will continue to promote the construction of a waste lead-acid battery recycling network system to promote the sustainable development of the circular economy industry.
Industry entry standards have become stricter, and market concentration has increased. In December 2017, the Ministry of Environmental Protection issued the “Hazardous Waste Business License Management Measures (Revision Draft) (Draft for Comments)”, which further strengthens the supervision and management of waste lead-acid battery collection, storage, utilization and disposal activities. China's recycled lead enterprises are characterized by a large number and small scale. According to the official website of Camel Co., Ltd., there are currently 34 domestic companies that are actually qualified to recycle used batteries. Stricter industry entry standards will help increase market concentration.
Regenerated lead companies are affected by environmental pressure, and inventories continue to decline. China's recycled lead companies are mainly located in Anhui, Henan, Jiangsu, Hubei, Yunnan and other places. Beginning in March, some recycled lead companies in Anhui were ordered to stop production and be overhauled. On May 9, the radiation area of the Yangtze River Economic Belt Waste Removal Campaign was widened, and the restricted area of recycled lead production was expanded. At the same time, the environmental protection department has carried out strict environmental inspections on solid waste enterprises in inland regions, and recycled lead smelters in Jiangxi, Yunnan, Guizhou and other regions have been phased out. Lead stocks on the Shanghai Futures Exchange continued to decline. As of the end of May, SHFE lead stocks were only 10,967 tons, a decrease of 8337 tons from April. Inventories in Shanghai and Guangdong also dropped from around 15,000 tons at the end of April to 11,000 tons. It is expected that the supply of refined lead will continue to be limited under the continuous influence of policies. However, consumption will enter a peak season, compounded by low inventories, and lead prices will remain high.
Profit forecast and investment suggestions: The company's net profit for 2018-2020 is expected to be $338, 367, and $384 million respectively; EPS is $0.31, 0.34, and 0.35 yuan respectively, and the P/E corresponding to the closing price on June 13, 2018 is 18.5X, 17X, and 16.3X, giving ratings for increasing holdings.
Risk warning: lead prices fall short of expectations, and the company's environmental protection standards are not up to standard