Event

Jinyuan shares issued 2020 medium report

The company released the 2020 interim report, with revenue of 3.251 billion yuan in the reporting period, an increase of 0.47% over the same period last year, and a net profit of 194 million yuan, an increase of 2.10% over the same period last year, corresponding to an EPS of 0.27 yuan. In the first half of the year, the weighted average ROE of the company reached 4.58%, down 0.45% from the same period last year.

Brief comment

The harmless business grew rapidly, and the performance of the resource business declined significantly in the first half of 2020. The company's harmless disposal business achieved an income of 215 million yuan, an increase of 20.9% over the same period last year, and a net profit of 57.9476 million yuan, an increase of 29.91% over the same period last year.

The main reason is that Heyuan Environmental Protection, a subsidiary, benefited from the huge gap in hazardous waste disposal in Guangdong and the management team planned the reserve of hazardous waste materials in advance, with an operating income of 65.1649 million yuan and a net profit of 42.1222 million yuan during the reporting period. contributed to the main performance increment of the harmless disposal business. At the same time, the company's resource business achieved an income of 2.039 billion yuan, an increase of 1.25% over the same period last year, but its net profit was-33.4937 million yuan, down 39.7159 million yuan from the same period last year, mainly due to the decline in the prices of some metal products due to the outbreak of the epidemic. while leading to a reduction in gross profit margin, the company also made provision for a decline in the price of inventory.

In the first half of the year, the building materials business was relatively sound, and the net profit increased steadily. During the reporting period, the company's building materials business realized business income of 995 million yuan, down 4.4% from the same period last year, of which the cement business increased by 0.51% to 729 million yuan, and the commercial concrete business decreased by 13.28% to 262 million yuan. Judging from the operation situation in different regions, the first quarter of Qinghai region originally belonged to the off-season of production and sales, so it was less affected by the epidemic. In the second quarter, due to the double influence of the pick-up of market demand and off-peak production, local cement prices increased significantly, and net profit increased significantly compared with the same period last year. Due to the epidemic and weather in Guangdong, demand has been hit to a certain extent, and the unit cost of purchasing limestone has increased by nearly 50 yuan compared with the same period last year, and the net profit of building materials business in Guangdong has dropped greatly compared with the same period last year. Overall, the company's building materials business achieved a net profit of 149 million yuan in the first half of the year, an increase of 9.39% over the same period last year.

Hazardous waste disposal capacity growth space is large, the future is expected to continue to contribute to the performance of the company's hazardous (solid) waste capacity is mainly in Jiangsu, Shandong and other regions, so far has been put into production capacity of 1.0941 million tons (including harmless capacity of 587950 tons), has been approved by the EIA total capacity of 528000 tons (including harmless capacity of 400000 tons), the scale of production capacity is in the forefront of the industry, and there is more room for capacity growth in the future. Considering that with the gradual tightening of domestic environmental protection inspectors, the number of enterprises that illegally dispose of hazardous wastes will gradually decrease, and the demand for legal disposal of hazardous wastes will increase rapidly, we believe that although the company's production capacity of hazardous waste disposal will gradually reach production, the hazardous waste disposal business sector is expected to continue to contribute to performance increment in the future.

For the first time, coverage gives the company an overweight rating.

In June this year, the company signed the Strategic Cooperation Framework Agreement and the Investment Framework Agreement with China Energy and its wholly-owned subsidiary China Energy Engineering respectively. In the future, the company will establish strategic cooperation with China Energy in the field of environmental protection business, and will carry out multi-dimensional and in-depth cooperation in strategic level, operation management and technical cooperation. We estimate that from 2020 to 2022, the company will achieve operating income of 7.999 billion yuan, 10.337 billion yuan and 11.822 billion yuan respectively, and return to its mother net profit of 549 million yuan, 653 million yuan and 753 million yuan, corresponding to EPS of 0.77 yuan, 0.91 yuan and 1.05 yuan respectively.

Risk hint: the risk that the company's hazardous waste disposal capacity under construction cannot be put into operation; the poor implementation of environmental protection policies leads to a slowdown in the growth of hazardous waste disposal demand; and the risk of a decline in cement prices.