Brief comment on performance

Hebi and Runan two waste incineration power generation projects have been put into production, and the company's orders are about to enter a period of intensive production.

Business analysis

The two projects are put into operation, totaling 1600 tons / day: 1) the first phase of Runan County municipal solid waste incineration power generation project (with a total scale of 900t / day) will be connected to the grid on December 26th. The return mechanism is a treatment fee of 69 yuan / ton, a daily guaranteed capacity of 480t/d, and an annual operation time of not less than 333days. 2) the 1000 ton / day project of Hebi Venous Industrial Park will be put into operation on December 31 (the project will be put into operation on January 31). In addition to power generation equipment, the project will set up 2 waste heat boilers with a rated evaporation capacity of 45t/h, which can handle 333000 tons of domestic waste per year. Excluding self-use electricity, the maximum annual power supply to the power grid under rated working conditions can be 1.156 × 108kWh (calculated to be about 350 degrees per ton after deducting self-use).

There are plenty of orders on hand, and this year has entered the project-intensive production period: in 2019, the company officially transformed into environmental protection and began the explosive growth of orders. At present, the total orders for waste incineration are about 25,000 tons / day (of which the first phase is 20000 tons / day, without deduction of rights and interests). At present, about 3200 tons / day has been put into operation, we expect to ship another 11650 tons / day in 2021, and the remaining orders will be put into operation in the next year or two. We believe that with the gradual commissioning of the project, the company's performance will increase rapidly.

The goal is ambitious, and the logic of Chengfa reengineering is in progress: the company aims to generate electricity by waste incineration with a scale of 30,000 tons per day, water operation of 2 million tons per day, and an annual sanitation amount of 500,800 million yuan, in addition to some kitchen waste, environmental protection equipment industry and so on. part of the project and equipment income will be confirmed during the construction period. Unlike traditional environmental protection companies, the annual cash flow of the company's high-speed business is about 1 billion yuan, which can effectively support the investment and financing needs of environmental protection projects for more than 5 billion / year (the capital is calculated at 20%). We expect that after the above goals are achieved in four or five years, the net operating profit of the environmental protection sector will be more than 650 million yuan, which is equivalent to creating an urban development environment.

Investment suggestion

The company has sufficient orders, the project will be launched intensively this year, and the performance of new orders has also entered the gradual cash-out period.

We are optimistic about the long-term development trend of the company, maintaining the operating income of 3.256 billion yuan from 2020 to 2022, and the return net profit of 626 yuan to 9.39 billion yuan. EPS0.98/1.46/1.78 yuan forecast, corresponding to the current stock price PE12/8/7X, according to the segment valuation method to value 10X in 2021, the target price is 14.93 yuan.

Risk hint

The advance of orders is not as expected; the acquisition of new orders is not as expected.