Event: the company announced that its operating income in 2020 was HK $3.52 billion, an increase of 29.83% over the same period last year; its net profit was HK $427 million, an increase of 51.72% over the same period last year; excluding VAT and other deductions related to the epidemic, net profit reached HK $306 million, an increase of 8.91% over the same period last year.
The sanitation sector maintained rapid growth in 2020, and the operation of hazardous waste business was under pressure under the influence of the epidemic. Sanitation sector: in 2020, the company signed 23 newly signed sanitation projects with an annual contract value of HK $1.048 billion; seven projects were terminated with an annual contract value of about HK $70 million; at the end of 2020, there were 113 projects in hand, with an annual contract value of about HK $3.33 billion.
Excellent billing and operating capabilities led the company's sanitation sector to achieve operating income of HK $2.821 billion in 2020, an increase of 43.3% over the same period last year, and gross profit margin increased by 5.0 pct to 29.5% year-on-year. (excluding VAT and other deductions related to the epidemic, operating revenue reached HK $2.696 billion, an increase of 37.0% over the same period last year; gross profit margin increased by 0.1 pct to 24.6%). Hazardous waste plate: after the Yaojiagang project in Yichang and the Hami cement kiln project in Xinjiang were put into production smoothly under the influence of the epidemic situation, the company still achieved a steady increase in treatment capacity, and the harmless treatment capacity increased by 48.4% to 109000 tons compared with the same period last year. The unit price of harmless treatment of hazardous waste decreased significantly under the influence of the epidemic (on the one hand, the demand dropped sharply due to a significant reduction in the amount of waste produced in the upper reaches in the first half of the year, and on the other hand, competition intensified significantly after the resumption of work in the second half of the year). The average unit price of harmless treatment fell 23.6% year on year to 2575 Hong Kong dollars / ton, driving the gross profit margin of the harmless treatment business down 11.1 pct to 46.1%.
The profitability of hazardous waste business in 2021 is expected to exceed expectations, and we will continue to pay attention to the order taking of sanitation projects. Sanitation plate:
The company's sanitation business development strategy remains unchanged, that is, the regional level will focus on the development of the Pearl River Delta region (other key areas include Guangdong-Hong Kong-Macau Greater Bay Area, the Yangtze River Delta, Beijing-Tianjin-Hebei and various provincial capitals and central cities). At the project level, we will continue to develop long-cycle projects. This kind of project has the characteristics of strong government payment ability, high demand for future expansion, cycle matching equipment use cycle, high profitability brought by scale effect, and so on. The company's advantages in cost control, integrated layout progress, and government relations are also conducive to the acquisition of large-scale orders in this kind of big cities, so we should continue to pay attention to the company's order taking. Dangerous waste plate: Yichang Yaojiagang project and Xinjiang Hami project were successfully put into production in 2020, and two projects in Shandong Province were also in trial operation at the beginning of 2021. We are optimistic about the accelerated release of production capacity of the above projects in 2021. With the stabilization and slight recovery of hazardous waste prices after the recovery of the epidemic, the company's profitability of the hazardous waste sector is expected to be significantly improved in 2021.
Maintain the "buy" rating: according to the company's sanitation project order plan and the production progress of the hazardous waste project, we maintain the 21max 22-year profit forecast and introduce the 2023 profit forecast. It is estimated that the 21-23 year return net profit of the company will be HK $5.28 million, respectively, and the current share price will correspond to the 21-23 PE times that of 9-7-6. We are optimistic about the advantages of corporate cost control, integrated layout, and government relations to ensure the acquisition of sanitation projects, while the profit situation of hazardous waste projects in the past 21 years is expected to pick up significantly, taking into account the company's performance growth, valuation is still undervalued, and future valuation still has room to improve, to maintain the "buy" rating.
Risk tips: increased competition in the sanitation market led to new orders and profitability less than expected; hazardous waste projects put into production and disposal prices are not as expected; the goodwill risk brought by M & An and so on.
