Forecast profit growth of 62% in 2021 over the same period last year. 80%

The company issued a pre-increase announcement on 2021 performance: it is expected to achieve a net profit of 22.0-2.45 billion yuan in 2021, an increase of 61.5%-79.9% over the same period last year, deducting a non-return net profit of 17.5-1.95 billion yuan, an increase of 84.1%-105.1% over the same period last year, which is in line with our expectations. We believe that the growth in the company's performance is mainly due to the steady development of the hazardous waste recycling business, the improvement in revenue and profitability, and the improvement in the market climate of the clean energy equipment business has also led to profit growth.

Pay attention to the main points

The recycling of dangerous scrap metals will grow steadily, and the recycling of battery disassembly wastes will be expanded. In the field of recycling of dangerous scrap metals, the company has put into production 1.78 million tons of front-end production capacity, including 370000 tons in Chenzhou, Hunan, 300000 tons in Dalian, Liaoning and 300000 tons in Deyang, Sichuan, with a total capacity of 2.75 million tons, ranking in the forefront of listed companies. We believe that the company has rare deep resource utilization capabilities in the market, metal extraction types and recovery rates are more prominent in the industry, and have significant technical advantages; in terms of channels, the company's national layout continues to promote, which will help the company to continue to improve its market share. At the same time, the company is actively arranging the field of waste disposal after the recycling and disassembly of power batteries, with an annual output of 15000 tons of refined nickel sulfate, 15000 tons of refined cobalt sulfate and 790 tons of lithium carbonate. We believe that the power battery recycling industry is expected to usher in a period of rapid development, the demand for waste disposal will rise year by year, and there is a strong demand for nickel, cobalt and lithium products downstream of the company's projects. we are optimistic that the company's business expansion will bring about incremental performance. we will further improve the company's resource layout and build a comprehensive metal resource leading enterprise.

The prosperity of clean energy equipment will be improved, and pumping planning will ensure the development of hydropower equipment. The company has rich experience in the design and manufacture of complete sets of hydraulic turbine units, and the nuclear power equipment technology is also in the leading level. According to the medium-and long-term Development Plan of pumped Storage (2021-2035) of the National Energy Administration, the total target scale of pumped storage production will be more than 6200 kilowatts in 2025 and 120 million kilowatts in 2030. The total installed capacity is about 421 million kilowatts. We believe that driven by the medium-and long-term development goal of pumped storage, the company, as one of the leading enterprises of hydropower equipment, is expected to continue to increase its new orders, along with the continuous improvement of the profitability of the company's hydropower and nuclear power business in recent years. we are optimistic about the steady development of the company's clean energy equipment business.

Valuation and suggestion

To maintain 2021E/2022E net profit of 23.77 million yuan and introduce 2023E net profit of 2.996 billion yuan, the current stock price corresponds to 13 times of PUnip E in 2022. We are positive about the steady growth of the company's main resource utilization industry and the increment of waste disposal business of pumped storage equipment and battery disassembly, and maintain outperforming industry rating and target price of 9.25 yuan, which corresponds to 20 times Pmax E in 2022, which has 54% upward space compared with the current stock price.

Risk

Metal prices fluctuated, project landing and capacity climbing were lower than expected, and the macroeconomic downturn affected demand.