Main points of the report
Cement + environmental protection, the forerunner of the extension of cement industry chain
The company went public through backdoor listing in 2014, entered the field of hazardous waste through mergers and acquisitions of new gold leaves in 2017 and carried out a series of expansion. In 2019, the revenue from environmental protection accounted for more than 65%. Although the proportion of profits is still dominated by cement, it is very clear that it is determined to transform to environmental protection. In terms of strength, the company can be described as the forerunner of cement transformation into environmental protection.
Cement: a highly elastic display of dominant areas
Qinghai region: we believe that the market is expected to usher in the resonance improvement of demand, pattern and supply.
1. The demand boom is accelerating. Since 2020, infrastructure has increased steadily, key projects in Gansu and Qinghai have been accelerated, the volume and price of cement in the region have risen, and the delivery rate has reached more than 100% since mid-April. Hercynian production is mainly sold to Tibet, where supply falls short of demand all the year round, and prices are basically maintained at more than 600 yuan per ton.
2. The market pattern is dominant. Qinghai total clinker production capacity of nearly 15 million tons, the company is the regional leader, the share of nearly 30%, the second Qilian Mountain share of about 16%, the leading enterprise competition thinking is unified, superimposed environmental constraints are strengthened, the market competition pattern is more stable. Qinghai production capacity is mainly concentrated in Haidong and Xining, less than 150 kilometers away from Lanzhou, supply and demand background and price operation maintain a certain linkage. In addition, the capacity utilization rate of Gansu and Qinghai is obviously better than that of other provinces in northwest China, and the marginal improvement under the background of good supply and demand provides higher flexibility.
3. Supply contraction provides marginal elasticity. This year, Jinding, salt lake Haina production line delayed resumption of production to provide marginal supply contraction, so that Haidong and Xining prices rose nearly 100 yuan at the beginning of the year, leading the surrounding areas. With the accelerated landing of some new projects, the regional market is expected to release greater price elasticity in the June-October peak season.
Heyuan region: price stability is outstanding under the closed market, 2020Q3-Q4 is expected to replicate V-shaped rebound.
Heyuan is located between the Pearl River Delta and eastern Guangdong, the market is relatively closed, and the price toughness of 2019Q4-2020Q1 is obviously better than that of eastern Guangdong. At present, the price in Heyuan area is more than 80 yuan higher than the same period last year. We judge that under the support of rush work in the peak season, regional prices are expected to replicate the V-shaped trend in 2019, and the profit elasticity of Q3~Q4 is more to be expected.
In summary, with the acceleration of Qinghai economy and the improvement of Guangdong pattern, the company's profit in 2020 has both high elasticity and certainty.
Environmental protection: the inflection point of performance has arrived, and the room for growth has been opened.
In the past, the progress of environmental protection business was relatively slow, and we believe that 2020 is a year of significant improvement in the company's environmental protection business. It mainly includes the improvement of Xinjinye management after the completion of the management transformation. Sanming South (65%) was certified in May 2019, and the collaborative disposal project of its own Heyuan production line (81%) was completed in October 2019. Xuzhou Longshan (26%) was certified in November 2019, and Tianhui Longyuan (60%) was certified in March 2020. It is expected that Kulun Banner, Ankang and Shaoyang will get certificates in 2020. And then provide greater profit flexibility. It is estimated that the company's attributable net profit from 2020 to 2022 is 9.0 Universe 1.38 billion yuan, corresponding to 8.5x/6.7x/5.5x for PE, with a "buy" rating.
Risk Tips:
1. Project schedule is lower than expected risk
two。 Cement prices are estimated to be on the high side.