Main points of investment:
Focus on the use of landfill gas for 15 years, gathering sand into towers to achieve the first landfill gas in the country. The parent company was established in 2007 to reduce carbon emissions and is mainly engaged in landfill gas business. by the end of 2020, the company has operated 82 landfill gas utilization projects with installed capacity 171.25MW, ranking second in the world in terms of project and scale, and the first in China. From 2016 to 2020, the company's revenue increased from 176 million to 519 million, CAGR was 31%, and net interest rate remained between 25% and 30%, with a five-year average of 1.59%.
Three core advantages help to continue to take the lead. 1) scale advantage: landfill gas niche market single project anti-risk ability is poor, the company takes advantage of scale, through the sharing of technical experience, strengthen the brand, horse racing enclosure, to achieve the strong Hengqiang. 2) Technical advantages: with projects all over the country, the company actively develops gas collection schemes under multi-scenarios, compiles industry standards, builds intelligent management platform, and improves gas production efficiency and power generation efficiency. 3) cost advantage: on the one hand, the company forms a strong cost control ability through unified management, centralized procurement and equipment sharing. At the same time, independent research and development of automatic monitoring programs, in the context of a 26% increase in the project at the end of 2020, the number of employees decreased by 9%, significantly reducing labor costs. In addition, with the reduction of the single scale of the industry, the county landfill strategy that the company focuses on will further highlight the cost advantage.
Traditional markets still have a bright future, emerging biogas has broad prospects for utilization, and carbon trading has led to incremental performance. 1) the permeability of traditional landfills is only 29%. With the national supplement and retreat of the slope, landfill incineration will coexist for a long time in the future. Driven by the triple factors of county waste production, technology upgrading and carbon trading, small-scale landfills gradually show development value, and the theoretical landfill gas market will continue to open. 2) with the large number and large scale of overseas landfills, with the commissioning of the company's Malaysia project, the overseas market is expected to grow in the future. 3) the company takes advantage of technical commonality and brand advantages to create an isolated island operation mode with a win-win pattern, and continues to open up a broader biogas utilization market. At present, the company has carried out project cooperation with industry leaders in the fields of leachate, kitchen waste, livestock and poultry manure, and is expected to rapidly replicate and expand in the future, seizing the biogas utilization market in 110 billion / year. 4) the company started its carbon trading business and ploughed the international and domestic carbon reduction trading market for 15 years. With the resumption of the carbon trading market, the company's carbon trading led to a further increase in profits.
Earnings forecast and rating: we believe that the company will enter a period of accelerated growth in the next three years. We predict that the return net profit of the company from 2021 to 2023 will be 1.77, 2.34 trillion, respectively, and the corresponding EPS will be 1.10, 1.46, 1.93 yuan per share, respectively, and the corresponding PE will be as much as 49-37-28. Considering the potential profit flexibility of the accelerated overlay carbon trading for the company in the future, we believe that the company can enjoy a valuation premium, coverage for the first time, and a "overweight" rating.
Risk: the national subsidy continues to decline, and the online bidding leads to the continuous reduction of subsidy standards. CCER prices are affected by market supply and demand and policies, and are lower than expected.
