The revenue and profits of sanitation business will increase by 30-40% in 2021:
In 2020, the annual service amount of the new bid-winning sanitation business reached 1.048 billion Hong Kong dollars, with a total contract value of 11.266 billion Hong Kong dollars. As of December 2020, the company has 113 sanitation projects, an annual service fee of HK $3.33 billion, an average service life of 9 years, a total contract value of HK $36.27 billion, and a total contract value of HK $29.96 billion for the remaining years of service. The annual income of new sanitation orders is expected to be about 1 billion yuan in 2021. According to the contract amount of sanitation business and the annual service fee, according to the calculation caliber after excluding subsidies, it is preliminarily predicted that the revenue and profit of sanitation business will increase by 30-40% in 2021.
The volume of hazardous waste business will double in 2021, and the profit will reach the 2019 level:
Under the influence of the epidemic, the average unit price of the company's harmless waste business fell by 23.6% in 2020, and the sales volume of resource utilization decreased by 17% compared with the same period last year, resulting in a 42% drop in profits to HK $96.76 million compared with the same period last year. The sales volume of resource utilization in 2021 is expected to be the same as that in 2020, and the amount of harmless treatment is double that of 2020. The main increments come from Shandong Pingfu harmless treatment project and Hubei Yichang incineration and landfill project. It is expected that the profit of hazardous waste business in 2021 is expected to reach or slightly higher than the profit level in 2019.
Major shareholders and directors increase their holdings to enhance market confidence:
According to the latest equity disclosure of the Hong Kong Stock Exchange, on April 26, 2021, the company received shareholder Deng Weiming's over-the-counter holding of 1.5 million shares. after the increase, Deng Weiming's latest number of shares was 252168000 shares, rising from 6.96% to 7.00%. Zhou Min, executive director of the company (chairman), has increased his holdings of the company's shares several times since April 2021. Zhou Min's latest number of shares is 175960000 shares, with the shareholding ratio rising to 4.89%. The increase in the holdings of major shareholders and company directors shows the confidence in the future development prospects of the company and the recognition of the value of the company.
Maintain the buy rating with a target price of HK $1.86:
Combining the company's earnings forecast and industry valuation, we give the company a target price of HK $1.86, which is equivalent to a 48 per cent increase in the company's target price of 11 times and 8.5 times PE, in 2021 and 2022 from the current price, maintaining a "buy" rating.
Risk Tips:
The growth of orders was lower than expected, the financing of PPP model was tightened, and the period of government accounts receivable was extended.