\u3000\u3 Guocheng Mining Co.Ltd(000688) 156 Road Environment Technology Co.Ltd(688156) )
Key investment points
The main business of sludge / mud disposal grew steadily, and the recycling of distiller's grains opened up a new growth track. The company has been deeply engaged in sludge and mud disposal for more than ten years, and its main business covers the treatment fields of high water containing wastes such as river and lake sludge, engineering mud and industrial residue. The company's net profit of compound profit increased to 29.19% in 20172021 years. In 2021, the initial volume of Baijiu fermented feed was obvious, and the future share is expected to continue to improve.
The upstream market-oriented distiller's grains and the downstream resistance restriction policy & price advantage jointly promote the release of feed demand for distiller's grains. The business model of distiller's grains recycling is upstream distiller's grains recycling - middle end biological fermentation products - downstream feed sales.
1) upstream distiller's grains acquisition: raw material marketization, scale & storage and transportation capacity jointly promote the advantages of material acquisition. The main treatment methods of the lees are landfill or fertilizer and simple feed. The process is easy to pollute the environment and lose nutrients. Considering the requirements of quality and transportation radius, the enterprises with the capacity to handle the scale and storage capacity are more advantageous. In 2020, the Baijiu production in China was 741 million litres. According to the proportional conversion relationship, we estimate that the theoretical market space of distiller's grains feed is 17.8 billion yuan; 2) Sales of downstream products: the policy of resistance restriction gives birth to the demand for products and accelerates the volume with high cost performance. Driven by the national policy of limiting resistance and reducing resistance, the demand for bio fermented feed of distiller's grains rich in functional components is strengthened, and the nutritional components of distiller's grains feed are rich, which can replace some corn and soybean meal. Calculated according to the current price of each product, the cost performance of distiller's grains feed products is outstanding. In 2021, the total feed output of four major animals in China was 290 million tons, According to the corresponding addition proportion of different categories, we estimate that the theoretical market space of distiller's grains feed is 23.1 billion yuan.
The expansion of distiller's grains resources is imminent, and the advantages of technology, channel and product consolidate their position. 1) Deep ploughing, rich R & D patents and effective technology industrialization. The company independently researched and developed the distiller's grains recycling process, and authorized 23 independent research and development patents by the beginning of 2022; Gulin Luther, the first resource-based project, has been pregnant for six years and initially realized the net profit from loss to profit in 2020. 2) Regional card position & channel binding, occupying the first mover advantage of the industry. a. High tech enterprises have been introduced by the local government and have reserved scarce land resources development projects; b. The upstream distiller's grains are directly mined, large-scale material collection and efficient production are carried out, and long-term cooperation is signed to ensure the stability of incoming materials; c. Downstream customers are all over the country, with decentralized supply hedging fluctuations. After years of cultivation, they have entered the list of major customers and suppliers for stable cooperation. 3) High cost performance & functional value, feed product price & market penetration has great room for improvement. The company has complete product categories and outstanding functional and nutritional indicators. Compared with common feed raw materials such as corn and soybean meal, the company has significant cost and functional value advantages, and there is more room for the improvement of product price and market penetration in the future. 4) The planned feed capacity is 300000 tons, more than 4 times expanded, and the profitability of typical projects is strong. The company has carried out industrial layout in Gulin, Renhuai, Jinsha and Huichuan, Guizhou, and plans to achieve 300000 tons of distiller's grains feed capacity by 2023, more than four times the capacity in 2021. Taking Gulin project as an example, the net interest rate of a single project at full production is 21.75%, roe is 37%, and profitability is outstanding. Besides the resource of sauce, the company will expand other flavour Baijiu, insect protein and other organic waste to open up room for growth.
Based on the long-term agreement, the industrialization model is driven by the Yangtze River Protection + regional expansion of Guangdong, Hong Kong and Macao.
The business model of the company's river lake sludge and engineering mud business is stable. In the future, the company will actively layout the Yangtze River Protection and new projects in Guangdong, Hong Kong and Macao Bay area, so as to realize the steady growth of the traditional main business.
Profit forecast and investment rating: we believe that there is sufficient market space for distiller's grains recycling, the company's first mover & product advantages are prominent, the leading position is consolidated, and the production capacity is expected to achieve rapid growth soon. We expect the net profit attributable to the parent company to be 77 / 105 / 171 million yuan from 2021 to 2023, an increase of 61.25% / 36.80% / 62.43% year-on-year, corresponding to 28, 21 and 13 times of PE, covering for the first time, Give a "buy" rating.
Risk tip: the newly signed orders of river and lake sludge are less than expected, the price fluctuation risk of raw materials and market price fluctuation risk, and the industry competition intensifies.
