Events:
The company released the mid-2020 report, during the reporting period, the company realized operating income and net profit of 3.251 billion yuan and 194 million yuan respectively, an increase of 0.47% and 2.10% respectively over the same period last year, and the performance growth was slightly lower than expected.
Main points of investment:
The transformation of environmental protection strategy is firm and thorough, the expansion of new projects is smooth, and the performance of resource utilization is a drag. During the reporting period, the revenue of the company's environmental protection business reached 2.253 billion yuan, an increase of 2.84%. Among them, the harmless sector achieved an income of 214 million yuan, an increase of 20.90%, and a net profit of 58 million yuan, an increase of 29.91%. The main income came from Heyuan environmental protection in Guangdong. During the period from January to August, the company obtained hazardous waste operation licenses for a number of harmless projects, and increased its hazardous waste disposal capacity by 234900 tons, laying the foundation for subsequent growth.
During the reporting period, the income of the resource sector reached 2.039 billion yuan, an increase of 1.25%. The net profit returned to the mother was-33 million yuan, which turned into a loss over the same period last year, mainly due to the sharp fall in commodity market prices during the epidemic in the first quarter.
The supply and demand of cement in Qinghai has improved, and the rainy season in Guangdong has dragged down the performance. During the reporting period, the company's building materials business achieved an income of 995 million yuan, down 4.4%; the net profit returned to the mother was 149 million yuan, an increase of 9.39%, and the cost was well controlled. The layout of the company's cement plate is mainly in Qinghai, supplemented by Guangdong, the supply end in Qinghai has shrunk significantly, the regional key projects on the demand side have been centrally started, and the measures of stacking off-peak production can effectively resist the impact of the epidemic. However, the company was affected by the strong rainy season in the south due to El Ni ñ o, which superimposed the increase in the cost of purchased raw materials in Guangdong, resulting in a big decline in performance in Guangdong. In the second half of the year, with the cost savings of raw materials brought about by the company's mine forensics, the performance of building materials business in Guangdong is expected to improve significantly.
Join hands with central enterprises to promote the development of the environmental protection sector and further implement the high-speed expansion strategy of environmental protection. On June 5, 2020, the company signed the Strategic Cooperation Framework Agreement with China Energy Engineering Group Co., Ltd. China Energy will actively help Jinyuan to promote the development of environmental protection business. the company will acquire a 35% stake in China Machinery Technology by publicly delisting for no more than 577.5 million yuan. At the same time, the company introduces Hai Venture Capital to strengthen the coordination of the industrial chain. On the one hand, it can learn from Hai Chuang in terms of technology and management, and improve the project management level of collaborative disposal of cement kilns. On the other hand, the company's professional incineration and resource utilization business can form upstream and downstream business coordination with Hai Chuang environmental protection, and reduce production costs.
Downgrade profit forecast and maintain buying rating: the company's performance growth is slightly lower than expected, and the business trend of building materials and environmental protection is good in the second half of the year. For caution, we downgrade our profit forecast. It is estimated that the net profit from 2020 to 2022 will be 8.15,10.30,1.216 billion yuan respectively (before the adjustment is 9.46,10.78 and 1.217 billion yuan). At present, the stock price corresponds to 8 times, 7 times and 6 times PE respectively. The valuation of the company is low among the environmental protection companies, the future business trend is good, the valuation has obvious room for repair, and the buy rating is maintained.