Beijing Geoenviron Engineering & Technology Inc(603588) (603588)
Key investment points
Event: the company announced the plan for non-public offering of A-Shares in 2021. The total amount of funds to be raised by non-public offering of shares shall not exceed 2.758 billion yuan, which shall be used for comprehensive utilization of hazardous waste resources, domestic waste incineration power generation project and supplementary working capital.
The chairman subscribed no less than 100 million yuan to demonstrate confidence, and the development of hazardous waste recycling accelerated. The company plans to raise a total amount of no more than 2.758 billion yuan through non-public offering of shares, of which Li Weiguo, chairman of the company, plans to subscribe for no less than 100 million yuan of shares in this non-public offering, demonstrating confidence. The net amount of the raised funds after deducting the issuance expenses will be used for the comprehensive utilization of hazardous waste resources (the investment amount is 1.161 billion yuan, accounting for 42%), domestic waste incineration project (the investment amount is 772 million yuan, accounting for 28%) and supplementary working capital (the investment amount is 825 million yuan, accounting for 30%). The funds raised will effectively accelerate the development of the company’s hazardous waste recycling business and waste incineration business, which is in line with the company’s resource business development strategic direction and the increasing trend of the proportion of operation business.
The hazardous waste recycling project is of high quality, with abundant sources of nickel containing hazardous waste & the layout is deeply recycled. The raised funds are proposed to invest 1.161 billion yuan in the comprehensive utilization project of hazardous waste resources, which are respectively used for 1) Jinchang comprehensive utilization project of hazardous waste resources: it is proposed to invest 423 million yuan, the total investment of the project is 1.012 billion yuan, and the internal rate of return of the project is not less than 17.80%, Build a design annual processing capacity of 100000 tons (15000 T / a of high sulfur anode slime, 25000 T / a of desulfurized nickel anode slime and 60000 T / a of solid and hazardous wastes containing copper and nickel). The products are copper sulfate solution and copper nickel alloy. The project is located in Jinchang, Gansu Province. The reserves of nickel ore in Gansu Province account for more than 70% of the country. Jinchang city is the location of Jinchuan Group. Jinchuan Group is China’s largest and world leading nickel cobalt production base and platinum group metals The refining center has the capacity of 200000 tons of nickel, 1 million tons of copper, 10000 tons of cobalt and 6000 kg of platinum group metals. There are abundant sources of nickel containing hazardous wastes and high added value of products in the area where Jinchang project is located; 2) Jiangxi multi metal resource recovery and comprehensive utilization project: it is planned to invest 738 million yuan, with a total investment of 1.137 billion yuan, with an internal rate of return of no less than 19.13%, and build an annual hazardous waste disposal line of 310000 tons, including 100000 tons of electrolytic copper and other multi metal deep processing production lines. The products are cathode copper, tin ingot, zinc, germanium, indium, bismuth, lead, gold, silver, platinum, palladium Nickel sulfate, etc. Jiangxi project expanded the overall disposal scale, laid out deep resource-based production capacity, improved the layout of the company’s resource-based industrial chain, and enhanced the value of front-end and rear-end collaborative products.
The implementation of incineration projects was accelerated, and the proportion of operation business was further increased. The raised funds are proposed to invest 772 million yuan in the waste incineration project, which are respectively used for 1) Yining phase I: it is proposed to invest 487 million yuan, the total investment of the project is 563 million yuan, the after tax internal rate of return of the project is not less than 6.38%, and the waste incineration capacity is 1000 tons / day. 2) Hezhou phase II: it is planned to invest 285 million yuan, the total investment of the project is 299 million yuan, the internal rate of return of the project is not less than 9.80%, and the production capacity of 500 tons / day of waste incineration and 100 tons / day of food waste (including 5 tons of waste oil) will be built. The waste incineration project will accelerate the implementation, contribute to stable cash flow, further increase the proportion of operation business and improve the quality of profit.
Profit forecast: the company’s resource-based business continues to expand and the layout is deeply resource-based. We maintain the net profit attributable to the parent company of RMB 770 / 10.0 / 1.31 billion from 2021 to 2023. Considering the impact of this non-public offering on the company’s total share capital, the corresponding EPS from 2021 to 2023 are RMB 0.73/0.78/1.02 respectively. The current market value corresponds to 22 / 20 / 15 times of PE from 2021 to 2023. The company is expected to replicate Beijing Oriental Yuhong Waterproof Technology Co.Ltd(002271) fine management ability, create a leader in hazardous waste recycling, increase the proportion of operation and maintain the “buy” rating.
Risk tip: the construction of hazardous waste production capacity is less than expected, the utilization rate of production capacity is less than expected, and the competition is intensified
