Core ideas:
Take the lead in building the "thermal power + solid waste" model, and heat demand is the core driver of profit growth. The company strives to build a recycling industry model of "solid waste treatment + cogeneration", while disposing of solid waste such as garbage and sludge. to provide clean heat and electricity for the industrial park. In 2018, the company's operating income was 3.01 billion yuan (- 9.4%), and the return net profit was 125 million yuan (- 63.6%). The decline in performance was mainly due to long-term equity investment, impairment losses on goodwill assets totaling 117 million yuan, and a decline in downstream demand caused by environmental supervision. 88% of the gross profit contribution rate of the company's main thermal power + solid waste business. The business model ensures that the company has a good cash flow, and the driving force of future performance growth mainly comes from the growth of thermal power demand and mergers and acquisitions of extension projects.
Regional heat demand integration and gradual release of production capacity, future growth is expected to look forward to the company's merger and integration of Zhejiang Quzhou (Donggang Thermal Power), Jiangsu Changzhou (Xingang Thermal Power), Jiangsu Liyang, Qingyuan Ecology (located in the main park) and Nantong Changan 5 projects. by the end of 2018, the installed capacity of power generation is 292.5 megawatts, the heating capacity is 2820 tons per hour, the daily treatment of garbage is 1000 tons, and the daily treatment of sludge is 7000 tons. Looking forward to the next 2 years, with the expected closure of competitors, the heating area of the company has greater growth flexibility, and regional heating integration is expected to be strong; in terms of the promotion of projects in different places, the company's total power generation capacity 75MW and heating capacity of 620t / h will be gradually put into production.
Deeply involved in the solid waste industry chain, multi-field layout will enter the harvest time the company deep layout solid waste whole industrial chain, recently won the bid with Everbright Fuyang waste incineration project, after the completion of the construction of the company's waste disposal capacity will be increased to 2500t/d. In addition, the real-time online monitoring system of dioxins developed by the company and Zhejiang University has also reached the international leading level, and there is more room for promotion in the future. At the same time, the company signed a strategic cooperation agreement with Yuan Han Energy to make use of the technological advantages of oxygen-rich combustion and new gasification, on the one hand, to improve the heating business efficiency of the company, and on the other hand, to provide liquid nitrogen, liquid oxygen, CO, CH4 and other chemical products for the existing industrial enterprises in the park, so as to improve the economic benefits of thermoelectric projects in both directions.
Regional integration + capacity release led to a rebound in profits, given a "buy" rating, the company's EPS in 2019-2021 is expected to be 0.37,0.46 and 0.56 yuan per share, respectively, and the corresponding PE is 16.2,12.8,10.7 times according to the latest closing price. The company's deduction performance from 2020 to 2021 will maintain a growth rate of more than 20%, which will be valued at 20 times PE in 2019, corresponding to a reasonable value of 7.34 yuan per share. The company has plenty of cash on hand, regional production capacity is expected to be integrated, and the deep layout of solid waste areas such as waste incineration; 200-400 million yuan buyback program is still promoting management confidence, giving a "buy" rating.
Risk tips: the fluctuation of thermal demand leads to the fluctuation of profit margin; the progress of project expansion is lower than expected; the improvement of environmental standards leads to the increase of operating costs and the uncertainty of asset impairment.
