Event: the company released its 2020 annual report, with revenue of 3.315 billion yuan-4.15% year-on-year and net profit of 303 million yuan-28.49% compared with the same period last year. Gross profit margin is 34.1%, down 2pct from 2019. Due to changes in preferential tax rates for some projects, the overall corporate income tax rate has increased from 11% in 2019 to 17% in 2020.
Comments:
The decline in the company's performance in 2020 is mainly affected by two factors: 1) under the influence of the epidemic, the start-up of upstream and downstream enterprises has decreased, resulting in a decline in the amount of hazardous waste disposal; and 2) as the new production capacity in the industry has been put into use, the competition in the industry has become increasingly fierce. The cost of resource utilization business has increased and the collection and transportation price of harmless waste market has declined.
The impact of the epidemic faded quarter by quarter. In the fourth quarter, the company's revenue growth rate in a single quarter was 6.6 billion yuan per quarter, respectively. 2020Q1-Q4 revenue in a single quarter was 8.2 billion yuan, which was 18.4 percent higher than that in the same period last year. The cumulative net profit growth rate of 2020Q1-Q4 is-48.6%, 36.4%, 30.9%, 28.5%, respectively, narrowing the decline quarter by quarter.
Industry competition intensifies, and the gross profit margin of harmless and resource utilization business declines. according to the National Annual report on Prevention and Control of solid waste pollution from large and medium-sized cities in 2020, by the end of 2019, the national hazardous waste license holders approved the collection, utilization and disposal capacity reached 129 million tons / year, an increase of 26% over the same period last year, and the actual collection and utilization disposal volume was 35.58 million tons, an increase of 32% over the same period last year. The actual capacity utilization rate is only 27.5%. From a sub-sector point of view, the company's resource-based business revenue in 2020 was 150 million yuan-1.95% compared with the same period last year, and the gross profit margin decreased by 3.17pct to 20%; harmless business revenue was 1.6 billion yuan-4.05% year-on-year, and gross profit margin decreased by 1.28pct to 49% year-on-year.
The company continues to expand its production capacity and optimize its qualification structure.
A total of 1.923 million tons / year of hazardous waste management license was obtained in 2020. Combined with the changes of industry and market, the company optimizes the qualification structure by means of technical transformation and adjustment of invalid qualification. As of the date of disclosure of the annual report, the total amount of qualification for the treatment and disposal of hazardous waste has exceeded 2 million tons / year, including comprehensive utilization of 750,000 tons / year, incineration of 360,000 tons / year, landfill of 280,000 tons / year and physicochemical treatment of 630,000 tons / year. At the same time, the company's design and disposal capacity of projects under construction exceeds 400,000 tons / year, promoting the acquisition of Xiongfeng environmental protection projects, and the production capacity is expected to continue to expand in the future.
Maintain the "overweight" rating. The company gets out of the impact of the epidemic quarter by quarter, optimizes its qualification structure, and continues to expand its production capacity.
We downgrade the company's 21-22 earnings forecast by 2.9% to 530,602 million yuan, adding a 23-year profit forecast of 655 million yuan, corresponding to 0.60 EPS 0.68 picks 0.74 yuan in 21-23, and the current stock price is 14 times of 21-year PE, maintaining the "overweight" rating.
Risk hint: the progress of the project is not as expected, and there is a shortage of operational personnel after the company's expansion.