\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 827 Chongqing Sanfeng Environment Group Corp.Ltd(601827) )
The layout of the whole industrial chain, “incineration +” brings new growth. As the operation and listing platform of waste incineration power generation project under Chongqing state owned assets, the company has gradually expanded from the production and sales of waste incinerator equipment to the EPC Construction and operation business of the project. The coordinated development of the three businesses drives the growth of performance. In recent years, with the waste incineration project as the core, the company has expanded businesses such as waste removal and transportation, food waste disposal, leachate and fly ash treatment. The “incineration +” business layout has brought new performance growth points and broken the growth ceiling of the industry.
Domestic waste incinerator industry leader, EPC Construction Business complements the industrial chain layout. The equipment business of the company mainly sells incinerators and landfill leachate treatment system. Based on the introduction of a full set of waste incineration equipment from Martin Company of Germany, the company takes the lead in realizing the localization of high-end waste incinerators through in-depth technical cooperation and independent research and development. At present, the capacity of incinerators has been increased to 45 sets / year. EPC Construction Business complements the key link in the layout of the whole industrial chain, controls the project progress and investment cost, and achieves remarkable results in cost reduction and efficiency increase.
Waste incineration is a rigid demand in the disposal of urban domestic waste, and there is still performance guarantee in the 14th five year plan. The policy of “zero landfill” of domestic waste was introduced, the capacity of sanitary landfill contracted, and the substitution effect of waste incineration capacity was further strengthened. According to the 14th five year plan, the incineration capacity of municipal solid waste is expected to reach about 800000 tons / day by 2025, with an incremental space of 40.9% compared with 2020. The industry has passed the stage of low price competition to get orders, the ton waste treatment fee of new projects has increased year by year, the proportion of operating income of Companies in the industry has increased, and the profitability and cash flow have improved. Compared with overseas leading companies, the industry valuation has room for improvement and the configuration value is prominent.
The operation of deep ploughing waste incineration power generation project is leading in the industry in terms of operation scale and operation efficiency. The operation of waste incineration power generation project has gradually developed into the company’s core business. By the end of June 2021, the company has invested in 51 waste incineration power generation projects, with a designed waste treatment capacity of 55800 tons / day (including joint-stock projects), of which 33 waste incineration power generation projects have been put into operation (including joint-stock projects), with a total design treatment scale of 38000 tons / day. Benefiting from the use of self-produced equipment + EPC Construction and relying on the refined operation of the project, the company’s unit garbage on grid power will reach 334 kwh in 2020, and the self consumption rate of the project is only about 11.7%, which is lower than the average level of 15% – 19% in the industry. The power generation efficiency is ahead of comparable companies in the industry.
Investment suggestion: the company’s EPS is expected to be 0.74/0.75/0.85 yuan in 21, 22 and 23 years respectively, corresponding to 11.0/10.8/9.6 times of the closing price PE on March 14, 2022. The company’s project operation scale and operation efficiency are in the leading position in the industry, there are sufficient projects under construction and preparation, and the layout of the whole industrial chain is waste incineration project equipment manufacturing, EPC Construction and operation, In the future, relying on the extension of waste incineration project, expand the “incineration +” business such as food waste disposal and solid waste disposal, and have high growth space. Through relative valuation and absolute valuation, it is estimated that the reasonable share price range of the company is 9.00-9.49 yuan / share, corresponding to 12.0-12.7 times of PE in 2022. Give the company 12.0 times PE in 2022, the target price is 9.00 yuan, the first coverage, and the rating of “prudent recommendation”.
Risk warning: the progress of project construction and operation is less than expected; The risk of industry slowdown; The risk of slowing down the speed of inclusion in the national supplementary catalogue; The development of large solid waste business is less than the expected risk.
