Event
Dongjiang Environmental Protection issues 2020 Mid-term report
Dongjiang Environmental Protection released the mid-2020 report that the company achieved operating income of 1.479 billion yuan during the reporting period, a decrease of 12.48% over the same period last year, and a net profit of 161 million yuan, down 36.4% from the same period last year. During the reporting period, the company achieved earnings per share of 0.18 yuan, down 37.9% from the same period last year; the weighted average ROE was 3.63%, down 2.43% from the same period last year.
Brief comment
Epidemic factors have led to a decline in the company's revenue, and it has recovered in the second quarter. Due to the influence of COVID-19 's epidemic situation in the first half of the year, the company's upstream and downstream enterprises shut down and cut production, resulting in a decline in domestic demand for hazardous waste disposal. The company's industrial waste treatment and disposal business income decreased by 13.34% to 691 million yuan compared with the same period last year, with a gross profit margin of 49.92%, slightly higher than the same period last year. In terms of resource utilization business, it was also affected by the epidemic. While the overall demand for resource utilization products decreased, product prices also dropped to a certain extent. As a result, the company's industrial waste resource utilization business income decreased by 14.86% to 482 million yuan compared with the same period last year. At the same time, the gross profit margin was 23.22%, down 3.71% from the same period last year. But at the same time, the company continues to speed up market expansion, steadily promote industrial layout and service upgrading, strengthen internal management, pay attention to reducing costs and increasing efficiency, and actively organize resumption of work and production. In the second quarter, the operating income and return net profit reached 821 million yuan and 105 million yuan respectively, an increase of 24.76% and 88.94% respectively compared with the same period last year. It shows that the operation of the company has improved since the beginning of the second quarter.
In the gradual release of construction capacity, the performance increment company is expected to continue to contribute to the field of hazardous waste disposal as a leading enterprise in the field of hazardous waste disposal. Since the beginning of this year, four projects have obtained hazardous waste operation licenses and put into production, with a total increase of 838 million tons / year of hazardous waste disposal qualification, of which incineration qualification and landfill qualification are 4.98 million tons / year and 1606 million tons / year respectively, and the capacity structure has been continuously optimized. In terms of other production capacity under construction, the company has a total of 7 projects under construction or proposed, including Foshan Fulong incineration project, Zhuhai Fushan project, Shaoguan renewable resources landfill project, Fujian Nanping landfill project, Jiangsu Dongjiang second phase landfill project, Jieyang Dongjiang project and Mianyang Dongjiang project, with a total design qualification of about 5175,000 tons / year. Among them, 1755 thousand tons / year of resource utilization, 100,000 tons / year of incineration, 17.2 thousand tons / year of landfill and 70,000 tons / year of physicochemical. In the second half of this year, the company will focus on completing the construction of Shaoguan renewable resources landfill project, Foshan Fulong incineration project and Fujian oasis landfill project, which will add 974 million tons / year landfill capacity and 30,000 tons / year incineration capacity to the company. Maintain the "buy" rating of Dongjiang Environmental Protection
From the perspective of hazardous waste industry, with the gradual strictness of environmental protection inspectors, the amount of illegal disposal of hazardous waste by enterprises will gradually reduce, and the demand for legal disposal of hazardous waste will increase rapidly. Because there is a big obstacle to the trans-regional transfer of hazardous waste, and the supply gap of harmless capacity is larger than that of resource capacity, therefore, we think that there is more room for development in the regional hazardous waste disposal industry where the capacity of harmless disposal is relatively scarce, such as Jiangsu, Zhejiang and Guangdong.
Considering that the company is the leader in the field of harmless and hazardous waste disposal, and the business layout is mainly concentrated in Guangdong and East China, we believe that with the gradual commissioning of its production capacity under construction, the company's future performance is expected to continue to grow. We estimate that from 2020 to 2022, the company will achieve operating income of 3.387 billion yuan, 4.115 billion yuan and 4.478 billion yuan respectively, and return to its mother net profit of 393 million yuan, 611 million yuan and 693 million yuan, corresponding to EPS of 0.45,0.69,0.79 yuan respectively, maintaining the "buy" rating of Dongjiang Environmental Protection.
Risk tips: the release of production capacity of the company has been hindered; the government's environmental inspectors are not up to expectations; the production activities of upstream enterprises have been affected, resulting in reduced demand for hazardous waste disposal.