Key points of investment:
The company traditionally specializes in waste incineration and environmental protection equipment. It is a company with international and innovative genes. The company was founded in 2006 in Nantong, Jiangsu, and went public under the back cover in 2014, and bought out Belgian WATERLEAU Energize in 2015?
Waste incineration technology, won the bid for a waste incineration project in Hanoi, Vietnam in 2018, acquired Urbaser in 2019 to expand sanitation and solid waste, and in 2022, the company obtained EV authorization to expand new energy. The actual controllers of the company are Yan Shengjun and Mao Hongju, who hold 21.22% of the shares.
The company issued an equity incentive plan in October 2023. The performance assessment requires net profit of not less than 838 million yuan in 2024.
Environmental protection: Selling Urbaser's light weight and overseas efforts, the main business increased significantly, and the 24Q1 net profit reached 200 million yuan. In 2021, the company sold Urbaser, achieved a reduction in both goodwill and debt, and the main environmental protection business went into battle. By the end of 2023, the company's waste incineration production capacity reached 21,600 tons/day, and the garbage storage volume in 2023 increased 44% to 7.05 million tons. In particular, overseas projects with strong profitability were put into operation one after another (the company's revenue in Hanoi, Vietnam is expected to reach 500 yuan per ton, which is significantly higher than the company's average waste incineration revenue of 295 yuan, and the company's total overseas waste incineration production capacity reached 7,868 tons/day). The company's main business will be significantly restored. Furthermore, the company's ongoing environmental service contracts exceed 1.1 billion yuan in annual contracts, and environmental protection equipment has successively signed a number of major overseas orders such as SUEZ.
Energy storage: The Rudong project was selected for the country's first package. The first set of tests was in line with expectations, and the 3.68 GWh order is expected to be released. Gravity energy storage has the advantages of short construction cycle, low electricity cost, long lifespan, flexible site selection, and high safety and reliability. In January 2022, the company was exclusively authorized to invest 50 million US dollars plus 50 million US dollars to invest in EV companies to expand the gravity energy storage business.
In July 2023, Rudong's “100MWh gravity energy storage complete equipment” independently developed and manufactured by the company was selected for the first (set) list of major technical equipment projects of the National Energy Administration. In May 2024, the first charging/discharging unit of the Rudong project was successfully tested. The energy conversion efficiency exceeded 80%, and the conversion efficiency reached expectations. At present, the company has signed an order for 3.68 GWh of gravity energy storage.
New energy: The landscape is developing rapidly, shipping carbon reduction is accelerating, and the company's green methanol explosion. The IMO suggests that zero-carbon and near-zero carbon emissions will account for 5% to 10% of fuel usage by 2030, and net zero emissions from shipping by 2050. The EU carbon market began to be incorporated into the shipping industry in '24 to accelerate carbon reduction in shipping. In addition, fuelEU Maritime requires shipping to reduce carbon by 2% in 2025, reduce carbon by 80% in 2050, and fines violators. Driven by the policy, alternative fuel ships are growing rapidly. As of April 2024, alternative fuel ships accounted for 49.5% of global orders, while methanol ships accounted for 9%. The company has actively deployed and released orders. Currently, it has signed contracts for more than 7,900 MWH of green power and more than 1.62 million tons of green methanol.
Investment analysis: The company's net profit for 2024-26 is estimated to be RMB8.50/1,28,831 million yuan, YOY is 152%, 48%, and 46%, and the current market value corresponding to the 2024-26 PE is 14/9/6 times that of the company. The company's 2024-26 net profit CAGR reached 47%, far higher than the average CAGR of 20% for comparable companies. Referring to the average level of 0.69 times PEG of comparable companies, we gave the company a PEG estimate of 0.45 times, corresponding to the company's target PE of 21 times, and a target market value of 17.9 billion yuan. Compared with the latest closing price increase of 51%, sunflower covered it for the first time and gave it a “buy” rating.
Risk warning: 1. Overseas business profits fall short of expectations; 2. Gravity energy storage and green methanol production progress falls short of expectations; 3. Risk of price fluctuations in green electricity and green methanol; 4. Financial security risk.