Introduction to this report:
As a water service platform under the Tianjin Municipal State-owned Assets Administration Commission, the company started with the sewage treatment business in Tianjin, and gradually expanded its business to the whole country. The business dimension will be further broadened as the two hazardous waste storage capacity projects in Juancheng and Yishui are put into operation.
Key points of investment:
Investment advice: EPS is forecast to be 0.36 yuan, 0.41 yuan and 0.46 yuan respectively in 2019-2021. Referring to the average valuation level of the industry, 20 times the dynamic PE in 2019 was given, with a target price of 7.2 yuan. First coverage, giving a neutral rating.
Water platform under the Tianjin Municipal State-owned Assets Administration Commission: Tianjin Municipal Investment Co., Ltd., the largest shareholder of the company, holds 50.14% of the shares. The actual controller is the Tianjin Municipal State-owned Assets Administration Commission. Currently, the company's equity water production capacity is 5.425 million tons/day, of which PPP/BOT model sewage treatment capacity is 4.67 million tons/day, municipal and industrial water supply capacity is 335,000 tons/day, and recycled water production capacity is 420,000 tons/day. Sewage treatment production capacity under the commissioned operation model is 535,500 tons/day. The service area of the new energy business is 2 million square meters.
Taking Tianjin as the starting point of the business, it continues to expand to the whole country: the company's sewage treatment business starts with four sewage treatment plants in the central city of Tianjin. Since Tianjin's urbanization process is advanced, the company has turned the perspective of expanding the water service business to the whole country, and has now expanded to 15 provinces and cities in Tianjin, Beijing-Hebei, Central China, East China, and Northwest China. As the Fuyang-Jieshou, Honghu, Hefei and other sewage treatment projects that have been undertaken in the past two years are put into operation in 2019-2020, the scale of operating water assets will increase by 1,0111,700 tons/day compared to the end of 2018, driving a steady improvement in the company's performance.
After the hazardous waste disposal reserve production capacity is put into operation, it will become an important driving force for future performance growth: the company has now reserved two hazardous waste disposal projects in Shandong, Juancheng and Yishui, which will enter trial production in late 2019 and 2020, respectively. Furthermore, the expansion of the Juancheng project and the second phase of Yishui have also entered the implementation stage. The total scale of the Juancheng project is 44,500 tons, the total scale of the Yishui project is 71,800 tons, and the Juancheng expansion project is 146,000 tons. Production capacity types include incineration, landfill, physicalization, solidification, and metal recycling.
Risk warning: The initial load of water production capacity is low, which may drag down the company's overall gross profit margin