Recently, the company successfully issued convertible corporate bonds to unspecified targets, raising a total of 4.2 billion yuan. After deducting the issuance fee, the funds raised are intended to be used for biogas comprehensive utilization projects (185 million yuan), the purchase of mobile energy storage vehicle projects (110 million yuan), and supplementary working capital (125 million yuan).

Deeply lay out the comprehensive utilization of biogas to consolidate the company's leading position in the biogas power generation industry in the “comprehensive utilization of biogas” section. The company plans to build 19 related projects with an estimated total investment of 204 million yuan, with an average gross profit margin of 30.10% of the project. Up to the time of fundraising, the company had 108 comprehensive biogas utilization projects, the vast majority of which were landfill biogas power generation projects. On the basis of deepening the advantages of the company's landfill gas and electricity business, this fundraising further increased the incineration leachate biogas power generation business (involving 2 projects) and aquaculture manure biogas power generation business (involving 6 projects). We believe that this fundraising has further expanded the company's multi-industry layout in the field of biogas power generation, and may continue to expand the company's share of the biogas power generation market, which will help the company further develop its large-scale operating advantages, reduce operating costs, and enhance economic efficiency.

With CCER speeding up the restart of Dongfeng, the company's carbon trading business can be expected to have an elastic profit margin in December '22. Li Gao, director of the Climate Change Response Department of the Ministry of Ecology and Environment, said in his speech at the International Financial Forum that he will seek to restart China's CCER market as soon as possible. The company's biogas power generation business can effectively reduce methane gas emissions and create higher social benefits. According to the company's convertible bond issuance brochure, as of 22H1, the company has obtained CCER registration documents for 14 biogas power generation projects from the National Development and Reform Commission, another 6 biogas power generation projects have applied for CCER registration, and more than 20 biogas power generation projects have been developed for CCER projects. We believe that in a dual carbon context, with the acceleration of CCER's restart, the company's carbon trading business revenue can be expected to increase flexibly (according to our estimates, the company's carbon trading business revenue is expected to reach 0.79 and 119 million yuan in 23 and 24).

The mobile energy storage heating business was introduced, making full use of the collaborative advantages of the biogas power generation business. The fund-raising company innovatively introduced the mobile energy storage heating business, with a total investment of 124 million yuan. The business uses vehicles equipped with heat storage tanks to directly transport heat to customers, which can significantly alleviate the problems of long construction cycles, high costs, and short coverage radii of traditional heating networks, and has certain downstream requirements. According to estimates in the company's convertible bond issuance brochure, the company's mobile energy storage vehicle project is expected to generate revenue of 105, 237, and 395 million yuan respectively in the 1st to 3rd year of production, accounting for 21%, 48%, and 79% of the company's revenue in '21, respectively.

We believe that the mobile energy storage and heating business may promote the industrialization of the company's technologies in the fields of energy utilization and thermal energy storage, enhance the company's profitability, and enhance the company's core competitive advantage.

Investment advice: We forecast that the company's net profit for 2022-2024 will be 0.52, 1.13, and 133 million yuan respectively, with year-on-year changes of -52.65%, 119.43%, and 17.35%; the diluted EPS will be 0.32, 0.71, and 0.83 yuan respectively, and the stock price corresponding to PE on March 10 will be 82.41, 37.55, 32.00 times (of which the 2022 forecast is adjusted based on the company's performance report data). Maintain an “increase in holdings” rating.

Risk warning: energy storage business innovation and technology risks; CCER policy and market change risks; incineration alternative landfill restricts the company's biogas business expansion risk; risk of changes in feed-in tariff subsidy policies; risk of accounts receivable accruing bad debts; relevant estimates are based on certain assumptions and have subjective calculation risks