Company Overview: Since the establishment of the “Specialized, Special and New” Little Giant, which is deeply involved in the prevention and control of heavy metal pollution, Sainz has been focusing on the heavy metal pollution prevention and control industry, and has developed a complete comprehensive heavy metal pollution control capability. Currently, the company mainly earns revenue through three major businesses: comprehensive solutions for the prevention of heavy metal pollution (28% of 22H1 revenue, same below), pharmaceutical sales (23%), and third-party operations (46%).
In terms of corporate governance, most of the company's core management team members have worked in related industries for many years and have strong collaborative and complementary advantages in business and management work. Furthermore, the company implements equity incentives, which can effectively boost employees' enthusiasm.
Industry trends: The context of environmental governance policies is clear, demand for innovative governance methods is strong, and the active guidance of national policies has played a good role in promoting the environmental management industry. In recent years, the overall development of relevant policies in the environmental governance industry has been characterized by more detailed and superior directions, stricter limit standards, and greater support for third-party governance models. We believe Synes may continue to benefit from these policy changes.
On the market side, traditional heavy metal pollution control technology is gradually unable to meet market requirements due to the large amount of hazardous waste, which can easily cause secondary pollution, etc. However, the company's series of advanced heavy metal wastewater treatment and reuse technologies are not only technologically advanced, but they also show economic advantages in terms of construction costs and operating costs. They may be a good choice for technical improvement projects in the incremental market and stock market of new construction and expansion of heavy metal sewage and wastewater treatment in the non-ferrous industry.
Competitive advantage: Technology leads the industry, shareholders empower performance, incremental orders can be expected for scientific research technology: Since its establishment, the company has successively received many awards and honors, such as winning the second prize of the 2018 National Technological Invention Award and the 2021 National Specialized New “Little Giant” enterprise. What is particularly noteworthy is that the company's related technology has shown certain economic advantages in terms of construction costs and operating costs.
Shareholder resources: As of 22H1, Zijin Mining held 21.22% of the company's shares, making it the company's second largest shareholder, creating a good synergistic effect: on the one hand, the Zijin mining business had a good ballast stone effect on the company's revenue; on the other hand, with the Zijin Mining Benchmarking Demonstration Project, the company can effectively promote and transform the latest technology.
Performance transformation: As of 22H1, the number of orders for the company's heavy metal pollution prevention and control comprehensive solution business was 66, with a total order amount of 350 million yuan. The coverage rate of the company's solution business revenue in '21 reached 223%. At the same time, although limited by factors such as the short application time of new technology and the large scale of non-ferrous stock projects, the company's market share in the stock market is relatively low, but its ability to penetrate the incremental market is strong.
Profit forecasting and company valuation
We expect the company to achieve operating income of 5551, 803, and 1,154 million yuan in 2022-2024, up 43.36%, 45.67%, and 43.69% respectively; net profit attributable to the mother was 0.68, 106, and 160 million yuan, up 53.13%, 55.68%, and 50.49% respectively (taking into account the company's 22-year performance report). Taking into account the company's leading edge in scientific research technology and resource endowment, we gave the company a 33-fold PE valuation. The corresponding target market value was 3,511 billion yuan, and the corresponding target price was 37.02 yuan. First coverage, giving a “buy” rating.
Risk warning: 1) The industry policy trend is moderate, and the marketing of new technology is poor; 2) the non-ferrous industry has experienced cyclical downturns or structural changes, and incremental order growth does not meet expectations; 3) The balance of accounts receivable is large, and there is a risk of charging bad debts; 4) Customer concentration is high; 5) Market competition intensifies and profit margins are declining; 6) The 2022 performance report data in the article is the company's preliminary accounting results. Please refer to the company's official annual report for actual values.