Main points of investment:
"Building materials + environmental protection" performance flexibility is expected to release, optimistic about the environmental protection plate to catch up. The company is a listed enterprise with building materials and environmental protection as its double main business and integrating cement, commercial concrete and environmental protection business. We believe that from this year, the company's building materials and environmental protection sector performance will both usher in high elasticity, especially the environmental protection business, the follow-up is expected to open a high growth model, driving the company's share price to achieve Davis double-click.
Qinghai cement supply and demand are both reversed, cement plate performance is expected to achieve high growth. The layout of the company's cement plate is mainly in Qinghai and supplemented by Guangdong. However, compared with Guangdong, where the price is high, the cement price in Qinghai is still in a depression with great potential elasticity. This year, the supply and demand pattern in Qinghai has both reversed: on the supply side, Salt Lake used to be the second largest cement enterprise in Qinghai Province, and bankruptcy restructuring has significantly reduced regional production; on the demand side, with the appearance of the pressure of national growth, regional key projects that have been delayed in the early stage are expected to start this year, driving a steady rebound in actual demand. At present, cement enterprises in Xining have announced the second round of price increases. As of May 22, the high-label price in Xining, Qinghai has reached 500 yuan / ton, 120 yuan / ton higher than the same period last year, which is the province with the highest year-on-year increase in the country, setting a good start for the whole year. According to our estimates, the company's cement sector performance is expected to achieve high growth for the whole year. In addition, considering the construction cycle of about 2 years of major projects, we are also optimistic about the stability of cement sector performance in the next 2 years.
Environmental protection projects are gradually put into production, and the performance release is worth looking forward to. Sensitive to the potential opportunities in the hazardous waste industry, the company began to race horse enclosure in 2015, making use of the resource endowment advantage of the company's cement business to gradually build a comprehensive layout of coordinated disposal of cement kiln, harmless incineration and landfill, and comprehensive utilization of resources. the aim is to build a leading enterprise in the hazardous waste disposal industry. However, the company's early "work fast" in the environmental protection sector in 2018-2019 also exposed the problem of low asset quality, and the performance was not as good as expected. In view of the above problems, while continuing to expand hazardous waste projects, the company also began to focus on the optimization of stock assets. We believe that the most difficult time for the company is over. With the gradual commissioning of projects in hand, the environmental protection sector of the company is expected to open an era of high growth of more than 40% a year in the next three years. With the elimination of market doubts and the increase in the proportion of environmental protection revenue, the company is expected to start a double rise in performance and valuation.
"large shareholders subscribe for a large proportion of Dingzeng + the introduction of Venture Capital" endorses the company's growth. On May 24, the company announced the preliminary plan for a non-public share offering. Major shareholders Zhao Hui, Xu Qing and Haichuang Environmental Protection plan to subscribe no more than 368.5 million yuan, 226.5 million yuan and 150 million yuan respectively.
We believe that a large proportion of major shareholders subscribe to increase and cement kiln collaborative disposal of the current absolute leader in the field of Haichuang Environmental Protection as a reality is an endorsement for the company's long-term growth. With the establishment of strategic cooperation with Haichuang, the two sides are expected to complement each other in production capacity, management, technology and cement business, so as to enhance the long-term competitiveness of the company's environmental protection sector.
Profit forecast and valuation: we are optimistic about the high elasticity of the company's "environmental protection + building materials" sector this year and the long-term growth of the environmental protection business.
We estimate that the return net profit of the company from 2020 to 2022 is 946 million yuan, 1.078 billion yuan and 1.217 billion yuan respectively, of which the building materials sector is expected to be 6.72,6.86 and 654 million yuan respectively, the environmental protection sector is expected to be 2.74,3.92 and 563 million yuan respectively, and the corresponding EPS for 20-22 years is 1.32,1.51,1.70 yuan respectively. The current stock price corresponds to 7.3,6.4,5.7times of PE from 2020 to 2022, respectively. With reference to the current valuation of 8 times and 14 times for cement stocks and environmental protection stocks, we comprehensively consider the regional pattern of the company's building materials and the high growth rate of environmental protection business in the next three years, giving cement and environmental protection business 7 times and 20 times PE respectively in 20 years, corresponding to a target of 14.2 yuan, which is still 47% of the current stock price, covering for the first time and giving a "buy" rating. (note: profit forecasts, EPS and valuation do not take into account the non-public offering plan announced on May 24)
Risk hint: environmental protection project profit is lower than expected, salt lake cement production line production resumption policy, Qinghai demand is lower than expected