\u3000\u3 Shengda Resources Co.Ltd(000603) 568 Zhejiang Weiming Environment Protection Co.Ltd(603568) )
Leading enterprise in waste incineration integration, enter new energy and open up growth space. The company has been deeply engaged in waste incineration for more than 20 years, and the equipment + operation are coordinated. The equity concentration is stable. As of January 13, 2022, the actual controller holds 57%, and equity incentive employee stock ownership is bound to the core interests. From 2016 to 2020, the return to the parent company increased by 40%, and the net profit margin on sales remained at 40% +. Enter the new energy field in 2021.
Rigid expansion of waste incineration industry, rationalization of business model & improvement of cash flow. With the rigid expansion of the industry, we expect the waste incineration volume to increase by 9% in the 14th five year plan. The national subsidy and retrogression slope was launched online through competitive bidding, which promoted the rationalization and improvement of cash flow at the C-end of the business model, and the payment of waste treatment fee to the C-end was low. The carbon reduction effect of waste incineration is significant, and CCER contributes 12% of the profit increment, which is expected to hedge the impact of national compensation.
Master the research and production capacity of incineration equipment, and increase the performance of self use and export. The company has the research and production capacity of incinerator, flue gas and sewage treatment system and automatic control system. Equipment investment accounts for about 50% of the total BOT investment. High growth of projects under construction & breakthrough in export sales. From 2017 to 2020, the revenue of equipment and services increased by 130%, the revenue of equipment and services increased by 146% in 2021h1, and related party transactions accounted for 89%.
By the end of 2021, 28500 tons / day has been put into operation, with 76% growth space, and the operating gross profit margin in 2020 is 63%, leading the industry. 1) High growth: independent bid winning & M & A helped to increase production capacity, with 50000 tons / day in hand at the end of 2021, of which 28500 tons / day have been put into operation, and the scale of operation increased by 21% from 2015 to 2021. 2) High profitability: in 2020, the operating gross profit margin was 63.35%, 13.6pct higher than the average value of the same industry, thanks to a) cost reduction: the equipment was self-produced and had strong cost control ability. By the end of 2020, the investment per ton of the project put into operation was 400000 yuan, 22% lower than the average value of the same industry. During the operation period, the amortization is low, the process is advanced and the materials are saved. In 2020, the operating cost per ton is 92 yuan / ton, 23% lower than the average value of the same industry. b) Income increase: the average processing fee of newly won projects in 2020 and 2021 is 91 yuan / ton and 95 yuan / ton, 19% and 6% higher than the industry average. The operation efficiency has been continuously improved. From 2016 to 2021, the online power consumption per ton increased by 3% to 316 kwh / ton.
Expand the integrated layout horizontally and vertically to create a comprehensive platform for large solid waste. As of 2021q3, 1) horizontal: the company’s hand kitchen treatment scale is nearly 2000 tons / day, sludge is about 300 tons / day, and leachate is about 840 tons / day. 2) Vertical: the collection and transportation scale of domestic waste is 4670 tons / day, and the collection and transportation of kitchen is 1333 tons / day.
The company cooperates with Qingshan to import resources and technology advantages, and cooperates with indigo to invest in the construction of high nickel matte with an annual output of 40000 tons. Indonesia’s export restrictions led to a tight supply of nickel, and the demand was driven by the large volume of power batteries & high nickel. At the beginning of 2022, the spot price of nickel rose to more than 20000 US dollars / ton. The company cooperates with Qingshan in the field of environmental protection and energy. Castle Peak is the global leader in stainless steel. 1) it is rich in nickel ore resources: invest in the construction of Castle Peak Park in Indonesia (the nickel reserves of the island account for 72% of Indonesia) and vidabe Industrial Park (about 9.3 million tons of nickel ore); 2) Leading technology and rich experience: lay out the new energy battery industry chain, open up the technical path of “laterite nickel ore nickel iron high matte”, and cooperate with Huayou, shengtun, Gem Co.Ltd(002340) etc. to invest in high matte nickel and nickel intermediate products projects. Weiming and indigo plan to build a high nickel matte project with an annual output of 40000 tons / year in weidabei park. Weiming holds 70% and the total investment is no more than 390 million US dollars. Qingshan can import upstream nickel ore raw materials, production technology and back-end customer resources for the project, and Weiming can reduce the cost of self-made general equipment.
Profit forecast and investment rating: the company’s main business has high growth and strong profit, and high nickel matte contributes new increment. We expect to return to the parent company of RMB 1.6/2/2.6 billion from 2021 to 2023, with a same increase of 27% / 26% / 27%, and EPS of RMB 1.22/1.54/1.96, corresponding to 24 / 19 / 15 times PE. It will be covered for the first time and given a “buy” rating.
Risk tip: the progress of the project is not as expected, and the partner Qingshan’s position closing risk, policy risk, financial risk and intensified industry competition
