环保主业表现突出，卫生事件影响固废板块毛利率。从公司净利润结构来看，应占 联营公司利润同比增长 7.3%，固废处置及垃圾处理板块共同发力，带动公司股东应占主营净利润同比增长 30.1%。环保主业在净利润中所占比重同比提升 2.4 个 pct 至 16.1%，环保股属性愈发突出。从经营数据来看，公司上半年一般固废 /危废/生活垃圾处理量分别为 26.99/15.67/ 94.49 万吨，同比增长 57.7%/54.5%/ 136.6%。受卫生事件影响，下游产废企业停工减产，需求下降压制短期处置价格， 固废处置毛利率同比下降 7.3 个 pct 至 66.5%。期间费用率保持平稳，其中销售 /财务费用率同比下降 0.16/0.23 个 pct。截至 1H2020，公司资产负债率为 27.1%， 较上年末提高 4.8 个 pct，财务状况保持稳健。This article is from CITIC Securities.
Conch entrepreneurship(00586) 2020H1 performed 1.92 yuan, in line with expectations. The main environmental protection business showed outstanding performance, with a year-on-year increase of 2.4 pct in net profit; adhering to the two-wheel drive strategy, solid waste disposal/waste incineration added production capacity of 214/1.48 million tons/year; laid out non-cement kiln collaborative disposal fields such as fly ash washing and sludge disposal to enhance one-stop service capabilities. Maintain the 2020-2021 net profit forecast of $76.9/8.60 billion, add a net profit forecast of $9.96 billion for 2022, and maintain a target price of HK$40.80 and a “buy” rating.
1H2020 performed 1.92 yuan, in line with expectations. The company 1H2020 achieved operating income of 2,817 billion yuan, an increase of 33.9% over the previous year; achieved net profit of 3.468 billion yuan, an increase of 10.4% over the previous year; converted to basic EPS of 1.92 yuan, which was in line with expectations.
The main environmental protection industry showed outstanding performance, and health incidents affected the gross profit margin of the solid waste sector. Judging from the company's net profit structure, the profit due to the joint venture increased 7.3% year on year, and the solid waste disposal and garbage disposal sectors worked together to drive the company's shareholders to account for a 30.1% year-on-year increase in the main net profit. The share of the main environmental protection industry in net profit increased by 2.4 pct to 16.1% year on year, and the nature of environmental protection stocks became more prominent. Judging from operating data, the company's general solid waste/hazardous waste/domestic waste treatment volume in the first half of the year was 26.99/15.67/ 944,900 tons, respectively, an increase of 57.7%/54.5%/136.6% over the previous year. Affected by the health incident, downstream waste production companies stopped work and cut production, falling demand suppressed short-term disposal prices, and gross margin of solid waste disposal fell 7.3 pcts to 66.5% year-on-year. The expense ratio remained stable during the period, with the sales/finance expense ratio falling 0.16/0.23 pct year over year. As of 1H2020, the company's balance ratio was 27.1%, an increase of 4.8 pct over the end of the previous year, and the financial situation remained stable.
The project expanded smoothly, and the leading position in collaborative disposal was stable. The company adheres to the “solid waste disposal+grate furnace waste power generation” two-wheel drive strategy. In the first half of the year, it added 2.14 million tons/year (4,300 tons/day) of solid waste disposal production capacity, increasing the manual solid waste disposal capacity to 7.86 million tons/year and domestic waste treatment capacity to 361,000 tons/day. The company actively promoted the cement kiln cement kiln collaborative disposal project. In the first half of the year, it obtained an additional production capacity of 500,000 tons/year through Conch Cement, andChina building materials(03323) & Mengxi Cement and other companies cooperated to expand production capacity by 950,000 tons/year. Non-Conch Cement's collaborative business expansion went smoothly, and the viability of the cooperation model was further confirmed.
Lay out non-kiln disposal fields to enhance one-stop service capabilities. In June of this year, the company acquired 70% of the shares of Shaanxi Bangda Environmental Protection Engineering Co., Ltd. for 216 million yuan, adding 100,000 tons/year of sludge disposal capacity. Through a combination of endogenous epitaxial extension, the company actively deployed non-cement kiln collaborative disposal fields such as fly ash washing and sludge disposal, adding a total production capacity of 690,000 tons/year in the first half of the year. Expanding the field of non-kiln disposal helps, on the one hand, to exert synergy and reduce the company's overall operating costs. On the other hand, it helps reduce dependence on cement production lines and enhance the company's one-stop service capabilities in the field of hazardous waste disposal.
Risk factors: Project progress falls short of expectations; government capacity to pay has declined; cement prices fluctuate greatly.
Investment advice: Considering that the company's 2020H1 performance is in line with expectations, we maintain the 2020 to 2021 net profit forecast of 76.9/8.60 billion yuan, and add a net profit forecast of 9.96 billion yuan for 2022. The company's current stock price is 7/6/6 times PE from 2020 to 2022, respectively. The company's main environmental protection business was given 15 times the target PE in 2021, and the shares held in Conch Cement were given a 30% discount based on the market value. The segment estimated target price was HK$40.80, maintaining a “buy” rating.
