As the leading enterprise of domestic coal circulation business, the company has actively transformed environmental protection and new energy service operators in recent years, and the dual main industries of coal trade and cogeneration go hand in hand. The company is the leader of domestic coal trade, rich in upstream and downstream resources and outstanding management efficiency, the company's ROE has been stable at more than 25% over the years; the company's cogeneration has been quite large-scale, with the product Jinyi and product Shanying thermal power and other new projects put into operation in the future, cogeneration business growth is expected. Give 2023 2.5x target PB, corresponding to the target price of 23.20 yuan, cover for the first time, and give a "buy" rating.
Based in Zhejiang facing the whole country, mainly engaged in coal circulation and cogeneration. The company is mainly engaged in coal circulation and cogeneration. Although revenue and profit have fluctuated under the influence of coal prices in recent years, it has maintained a growth trend in the long run. From 2017 to 2021, the average annual compound growth rate of operating income and return net profit was 16.4% and 31.2% respectively. As of 2022H1, Zhejiang SASAC holds a 42.6% stake in property Zhongda, the controlling shareholder of the company, through the state-owned assets company and transportation group, which is the actual controller of the company.
Deep ploughing coal circulation, strive to improve the quality of management. As a leading enterprise in the domestic coal circulation business, the company's coal sales have been growing in recent years, exceeding 68 million tons last year, accounting for 3% of the country's total coal consumption. Affected by high coal prices, the company's coal circulation business revenue increased significantly, with an annual growth rate of 106.5% in 2021. The company has a long-term and stable upstream and downstream customer base in coal circulation, which helps the company maintain steady growth in operation. In the future, with the gradual clearance of small companies in the industry, the company's market share is expected to further increase.
Cogeneration, scale growth leads to the improvement of performance. Under the guidance of the cogeneration support policy, the company has set up certain regional barriers near the plant sites in Zhejiang Province and gained stable downstream customers. Policies such as "linkage of coal and steam", "fixing electricity with heat and full access to the Internet" ensure that the gross profit margin of cogeneration business is stable at about 30%. At the same time, coal circulation and cogeneration business cooperate with each other, which can effectively stabilize the impact of coal price fluctuations on the overall performance of products. As new projects such as Jinyi and Shanying hot spots are put into production this year and next year, we expect the company's heating capacity to increase by about 20%, leading to a further improvement in the company's performance.
Focus on the "carbon reduction" strategy to open the second curve of the company's development. In recent years, the company has stepped up the research and development of ultra-low emission units. As a key energy-saving and carbon reduction project in Jiaxing, Tongxiang Tai Aisi has received a special subsidy of 20 million yuan. At the same time, the company actively develops the business of environmental protection and new energy, and sets up Zhongda New Energy Development (Zhejiang) Co., Ltd. to carry out distributed roof photovoltaic projects in a number of thermal power plants, among which, the roof distributed photovoltaic project of Tongxiang Taiais plant has been connected to the grid on May 31 this year, laying a solid foundation for the company to transform the new energy field and open the "second curve" for development.
Risk factors: large fluctuations in coal prices; cogeneration industry support policy changes; the company's new project schedule is lower than expected; production safety accidents and other extreme cases.
Earnings forecast, valuation and rating: we expect the company's net profit in 2022 to be 1.279 billion yuan respectively, a year-on-year increase of 3%, 12%, and 2.29 yuan, respectively, corresponding to the EPS forecast for 2022, 2024, the current share price corresponds to 9.2 PE 8.2max 7.5 times, PB 1.91.6 times. With reference to the average valuation of comparable coal circulation industry and cogeneration industry companies (Hangzhou Thermal Power, Fuchun Environmental Protection, WTO Energy, Mountain Coal International) in 2021, we give the company a target of 2.5 times PB in 2023, with a target price of 23.20 yuan, covering for the first time and giving a "buy" rating.
