Incident: On May 22, 2024, the company announced that according to the “Guiding Opinions on Regulating the Implementation of the New Government and Social Capital Cooperation Mechanism”, the “Tongzhou District Organic Waste Resource Comprehensive Treatment Center Project Investment, Construction and Operation Cooperation Agreement” has been terminated. On May 22, 2024, the company received the “Notice of Winning the Bid” for the Tongzhou District Organic Waste Resource Comprehensive Treatment Center project.
The Tongzhou project is comparable in size to the Guangzhou project, providing an important guarantee for the company's future performance growth. The Tongzhou District Organic Waste Resource Comprehensive Treatment Center project has an investment amount of 1,654 billion yuan, and the project franchise period is 40 years (2 years of construction and 38 years of operation). According to the previous cooperation agreement, the total organic waste treatment scale of this project is 2,100 tons/day, of which the food waste/food waste/manure treatment/waste oil treatment scales are 400 tons/day, 700 tons/day, and 300 tons/day, respectively. On the one hand, the investment amount of this project is quite impressive, which will provide an important guarantee for the company's revenue and performance in the next two years; on the other hand, by the end of 2023, the company currently has 34 biomass resource regeneration center projects, 21 of which have been put into operation and have 5 projects with a daily treatment scale of 1,000 tons or more. The Tongzhou project is basically equivalent to the benchmark Guangzhou project in terms of average daily processing scale. The 2023 Guangzhou project achieved operating revenue/operating profit of 8.4 billion yuan. The Tongzhou project is expected to continue contributing to the company's performance after completion and operation.
Integrated upstream and downstream biodiesel layout, actively planning bio-aviation fuel. On April 2, 2024, the official website of the National Energy Administration issued the “Notice of the General Department of the National Energy Administration on Publicizing Biodiesel Promotion and Application Pilot Projects”. Guangzhou is one of 22 application pilots. It is expected to promote the development of biodiesel domestically in the future. With external demand shifting to domestic demand, the biodiesel industry is expected to usher in an inflection point in development. The company created an original “ecological park” model, which relies on organic solid waste treatment projects, an integrated upstream and midstream layout, and has a stable source of raw materials; technically, the company created a full-enzyme production process, with a product yield of up to 94%, and has achieved stable large-scale application; at the same time, the company actively lays out high-end biodiesel products, and is currently planning to build or acquire bio-aviation fuel projects in Guangdong, Shandong, Tianjin and other places.
Actively developing the synthetic biological intelligent manufacturing industry, the first phase of the HMO project is expected to be put into operation in the second half of 2024.
Zhuhai Langjian, a wholly-owned subsidiary of the company, plans to produce hMOS series products. Currently, construction of the first phase of the project with an annual output of 260 tons has started and is expected to be put into operation in the second half of 2024; the second phase of the project with an annual output of 740 tons is expected to be put into operation in 2026, and the production capacity will reach 1000 tons/year at that time. The first phase of the project will mainly be used to produce major product sequences such as LNT, LnNT, 2'FL, and 3-FL, and will become the first LNT production line in China. It is expected that HMOS products will be officially launched on the market in 2025.
Profit forecast: Maintain the company's “gain” rating. We expect the company's revenue in 2024-2026 to be 1,889/2,228 billion yuan respectively, achieving net profit to mother of 270/2.83/302 million yuan, and corresponding PE of 15.99x/14.54x/13.63x, respectively.
Risk warning: Changes in the macroeconomic situation at home and abroad have exceeded expectations, the implementation of fund-raising projects has fallen short of expectations, biodiesel price spreads fluctuate, and profit forecasts and valuation models fall short of expectations