\u3000\u30 Chongqing Baiya Sanitary Products Co.Ltd(003006) 92 Anhui Zhonghuan Environmental Protection Technology Co.Ltd(300692) )
Event overview
On March 1, 2022, the company disclosed its annual report for 2021. During the reporting period, the company realized an operating revenue of 1.166 billion yuan, a year-on-year increase of 22.67%; The net profit attributable to the parent company was 202 million yuan, a year-on-year increase of 27.99%; The basic earnings per share was 0.48 yuan.
Analysis and judgment:
“Water + solid waste” two wheel drive, the annual performance is in line with expectations.
In 2021, the company achieved an operating revenue of 1.166 billion yuan, a year-on-year increase of 22.67%; The net profit attributable to the parent company was 202 million yuan, a year-on-year increase of 27.99%, and the performance was in line with expectations. In 2021, the company continued to focus on the dual main business of “water + solid waste”. In terms of water market expansion, the company continued to seize new orders in the water market, and accelerated the implementation of the company’s existing project upgrading, transformation and expansion projects. The annual water business income was 300 million yuan, a year-on-year increase of 32%. The market development of solid waste and waste power generation projects focused on the acquisition of Shijiazhuang waste power generation project and Taihe sludge drying disposal project in 2021, which realized the rapid growth of revenue and profit of solid waste section. The annual solid waste business realized revenue of 193 million yuan, a year-on-year increase of 304.44%. In the future, with the orderly operation of various projects under construction, the scale of operating projects will gradually increase, the capacity utilization rate will effectively climb, and the performance is expected to maintain steady growth.
The issuance of convertible bonds has been approved, and the follow-up of solid waste is expected to continue.
On June 16, 2021, the company issued a plan to issue convertible corporate bonds to unspecified objects, raising 864 million yuan. On January 11, 2022, the CSRC approved the company’s application for registration of issuing convertible corporate bonds to unspecified objects. The raised funds are mainly used for Chengde Lvyuan thermal power construction project in Chengde County, domestic waste incineration power generation project in Dancheng county and supplementary working capital. In recent years, the company has accelerated the development of solid waste business. As of November 30, 2021, the processing capacity of the company’s waste power generation projects is 2300 tons / day, and the scale of waste power generation projects under construction is 2100 tons / day. In 2021, the gross profit margin of the company was 35.75%, with a year-on-year increase of 3.15pct, mainly due to the increase in the proportion of solid waste business income. The proportion of solid waste income of the company increased from 5.03% in 2020 to 16.59%, and the gross profit margin of solid waste was 42.05%, which was higher than the overall gross profit margin of the company, forming a positive contribution to the increase of the gross profit margin of the company. With the continuous expansion of the company’s solid waste disposal business, the contribution of the company’s solid waste revenue will increase steadily. At that time, the company’s dual main business of “sewage + solid waste” will work together, and the company’s performance can grow steadily.
Operating efficiency was improved, cash flow was excellent, and debt structure was continuously optimized.
In 2021, the company’s net operating cash (excluding the cash paid for franchise project investment) continued to perform well, that is, 226 million yuan, a year-on-year increase of 104.25%. The company’s cash flow performance remains strong, mainly due to the increase of collection in the current period. We judged that the increase of the company’s collection was mainly due to the improvement of the scale of the company’s operating projects and the significant strengthening of operating efficiency. Among them, the income from investment and operation services increased by 79.23% year-on-year, and the cash inflow from operating activities was 977 million yuan, an increase of 22.14% year-on-year. The company also strengthened its operation in the capital market, the total amount of project loan financing also reached a new high over the years, the proportion of long-term debt increased significantly, the amount of long-term loans at the end of the period increased by 28.15% year-on-year, and the debt structure was optimized. In 2021, the net cash flow from financing activities was 678 million yuan, with a year-on-year increase of 8.98%, mainly due to the growth of financing scale. On the premise of expanding leverage and ensuring the stability of funds for projects under construction, the company still maintained a relatively safe asset liability ratio, with an asset liability ratio of 58.37% by the end of December. The company’s subsequent projects are under construction, and its excellent financial structure has laid a good foundation for the steady and sustainable development of the company’s business, which helps the company effectively promote the project process, put into operation orderly as planned, and is conducive to the long-term development of the company.
Investment advice
The company has formed a two wing development pattern of “sewage + garbage”, and the sewage treatment business and garbage incineration business go hand in hand, contributing to the rapid growth of the company’s performance. Based on the current operation scale of the company’s solid waste business, the construction progress of projects under construction and new orders, we lowered the profit forecast for 2022 and 2023 and added the forecast for 2024. The operating revenue from 2022 to 2023 was reduced from 1.983 billion yuan and 2.659 billion yuan to 1.457 billion yuan and 1.816 billion yuan respectively, with a year-on-year increase of 25.0% and 24.6% respectively. The operating revenue in 2024 was 2.211 billion yuan, a year-on-year increase of 21.8%; From 2022 to 2023, the net profit attributable to the parent company decreased from 330 million yuan and 432 million yuan to 260 million yuan and 330 million yuan respectively, with an increase of 28.7% and 27.1% respectively. In 2024, the net profit attributable to the parent company was 405 million yuan, with a year-on-year increase of 22.7%; The corresponding EPS is 0.61 yuan, 0.78 yuan and 0.96 yuan; PE is 15 / 12 / 10x, maintaining the “buy” rating.
Risk tips
1) the acquisition of new orders is less than expected;
2) the advance of orders in hand is less than expected;
3) the ramp speed of the new waste incineration project is lower than expected.
