Summary of the report
The company's development route is clear, focusing on the main business to create a circular economy. Since the company entered the cogeneration industry in the park by means of debt-bearing merger of thermal power plants in 1996, the company has ploughed the Fuyang base to create a model of solid waste (waste, sludge) disposal collaborative power generation and cogeneration circular economy industrial park. Then, with its own many years of project management experience and adopting the way of extension M & A, five large-scale park heating projects have been acquired successively, and the M & A projects have achieved great growth after M & A under the output of the management mode of listed companies.
After the exploration of multiple businesses, the non-main business with low gross margin was gradually spun off. In addition to the company's main cogeneration project, the company explored non-main areas such as steel rolling, coal trading, papermaking, packaging and cardboard sales by way of acquisition and establishment from 2011 to 2014. since 2015, the company has gradually spun off its main non-related business, clearly proposed to focus on the environmental protection industry in the future, and will devote itself to building the company into a comprehensive platform for environmental governance with solid waste disposal as the core. In addition to the company's current main business of "solid waste treatment + cogeneration", the company cooperated with Zhejiang University to develop dioxin online monitoring equipment in 2017 and entered the lithium battery recycling industry through limited partnership fund investment in 2018. Also hope to make achievements in other areas of environmental protection.
The future reconstruction and expansion of the four major bases outside Fuyang is expected to increase the heating capacity by 620 tons per hour. In addition to Fuyang, the other four bases have completed reconstruction and expansion projects or started reconstruction and expansion projects in recent years, and the four projects are expected to increase gas supply by 620 tons per hour, which will provide the company with future performance growth points. In addition, the company has further ploughed Fuyang headquarters and tapped the new demand. Recently, the company has won the bid for the PPP project of domestic waste incineration and disposal in Hangzhou Fuyang District Circular economy Industrial Park, which will become a new performance growth point of the company in the future after it is put into production.
The company has stable profits, low debt ratio and good cash flow. In the past three years, the gross profit margin of Fuchun Environmental Protection has been stable at about 20%, and its profitability is relatively stable. The company's asset-liability ratio remained at about 37% from 2015 to 2017. With the increase in monetary capital holdings in 2018, the asset-liability ratio dropped to 31.39%. The asset-liability ratio is at a low level in the industry, with a low risk coefficient, and is not troubled by the current problem of difficult financing and expensive financing. Since the listing of the company, the net cash flow of operating activities has been in a state of net inflow, with good cash flow and orderly capital operation, which provides a strong guarantee for the stable development of the company.
Investment suggestion
We are optimistic about the company's main business development model of "solid waste treatment + cogeneration". It is estimated that the company's total revenue from 2019 to 2021 will be 39.40,46.09,5.302 billion yuan respectively, with a net profit of 3.10,3.61,415 million yuan, corresponding to EPS 0.35,0.40,0.46 yuan.
Risk hint
1, the performance of the target of M & An is lower than expected; 2, listed companies calculate the impairment of goodwill for other reasons; 3, the production of downstream customers affected by environmental inspectors is lower than expected.
