Events:

The company released its mid-2022 report that revenue in the first half of the year was 7.804 billion yuan, an increase of 13.05% over the same period last year. The net profit of returning home was 657 million yuan, down 49.35% from the same period last year, and the performance was lower than expected, mainly due to the sharp decline in global commodity metal prices and repeated domestic epidemics.

Main points of investment:

The performance was lower than expected due to the sharp drop in global commodity prices and the superimposed domestic epidemic. During the reporting period, the company achieved 7.804 billion yuan in revenue and 657 million yuan in net profit in the first half of 2022, an increase of 69.42% respectively over the same period last year, while net profit decreased by 49.35% over the same period last year. 1) under the pressure of global inflation in the first half of the year, commodities fell sharply as a result of the Fed's interest rate hike; 2) epidemics occurred repeatedly in many domestic cities. In the field of hazardous waste, the company has integrated whole industry chain technology and facilities of "collection-storage-harmless treatment-resource deep processing". It can enrich and recover copper, gold, silver, palladium, tin, nickel, lead, zinc, antimony and other metal resources. During the reporting period, through technological upgrading, the company is actively arranging the disposal market of hazardous wastes such as waste liquid and waste residue produced by power storage battery recycling and disassembly units. The company's EIA approved capacity plans related to automotive-grade lithium battery materials include 15000 tons of refined nickel sulfate, 15000 tons of refined cobalt sulfate and 790 tons of lithium carbonate. In addition, the company's planned "40,000 tons / year new energy vehicle waste power battery disassembly project" has been put on record, adding 4 sets of waste power battery disassembly production line, and disassembling 40,000 tons of new energy vehicle waste power battery annually.

Carbon neutralization under the clean energy equipment leader is expected to benefit significantly, newly signed orders lead to plate performance growth. During the reporting period, the company's newly signed hydropower and nuclear power business orders were 394 million yuan and 593 million yuan respectively, effectively ensuring the future performance growth of the equipment manufacturing industry. In terms of hydropower, the company has signed "Strategic Cooperation Framework agreements" with China three Gorges Construction (Group) Co., Ltd., Huaneng (Zhejiang) Energy Development Co., Ltd., give full play to their respective advantages in resources, capital, talent, technology and market, and focus on the development strategy of the transformation of the country's energy structure during the 14th five-year Plan. Deepen all-round cooperation in pumped storage, conventional hydropower, nuclear power, hazardous waste treatment, new energy and scientific and technological innovation, and further expand the development space of the company's clean energy industry. In the aspect of nuclear power business, the ML- C control rod drive mechanism jointly developed by Huadu Company and China Nuclear Power Research and Design Institute has passed the anti-seismic test and has led the world in terms of technology. During the reporting period, Huadu received the qualified supplier Certificate of China Nuclear Corporation issued by Xingyuan Certification Center Co., Ltd., which is valid for up to three years until November 26, 2024. Huadu Company has successfully renewed the certificate for four times since it was obtained in November 2012.

Hazardous waste strategy is clear, there are scale and technology to lead the development of the industry. Over the years, the company has actively distributed the field of hazardous waste, with an overall disposal capacity of 1.78 million tons and 27 categories of hazardous waste, with outstanding scale advantages and collaborative disposal capacity. In addition, the core technical team of Shenlian Environmental Protection Group has been ploughing the hazardous waste treatment industry for many years, gathering a number of professionals in the fields of environmental protection and resource recycling. He won the first prize of China Nonferrous Metals Industry Science and Technology Award, the second prize of National Science and Technology Progress Award of the State Council and the first prize of Jiangxi Science and Technology Progress Award in 2014, 2015 and 2017 respectively. Among them, the company independently developed high-temperature melting technology in 2015, which reduced energy consumption by nearly 40%, changing the situation of low comprehensive utilization rate of domestic hazardous waste containing non-ferrous metals, and the main performance indicators are better than the international level.

Profit forecast and investment rating: the company's key projects have been put into production smoothly, the business has developed steadily, and the equipment manufacturing business is expected to benefit from the carbon neutral strategy, but it is expected that the second half of 2022 will still be greatly affected by the impact of the epidemic and superimposed pressure on global commodities. We downgrade our profit forecast, and the company's homing net profit from 2022 to 2024 is expected to be 18.45,21.21 and 2.489 billion yuan (before adjustment, it is 24.7829.62pm). The current share price corresponds to 11, 10 and 8 times PE in 22-24, maintaining a "buy" rating.

Risk hint: new project development is not as expected, hazardous waste disposal prices are lower than expected, and global commodity prices are under pressure.