In 2021, the new volume of waste incineration will be narrowed and the unit price will be increased. ① In terms of volume, it has become a trend to narrow the new volume in the waste incineration market. Compared with the same period in 2020, the number of bid winners and treatment scale in 2021 decreased by 11.5% and 25.3% respectively (of which the number of bid winners and treatment scale decreased by 40.82% and 41.78% respectively in the first half of 2021); ② At the same time, the average bid winning price has increased significantly. In 2021, the average bid winning price increased by 11.8% year-on-year (including 28.4% year-on-year increase in the average bid winning price in the first half of 2021). Since 2017, the bid winning price has maintained a rapid upward trend, superimposed with the promotion of policies. We believe that it is likely to implement the resident treatment fee and improve the charging mechanism according to the principle of “producer pays” in the future, and the unit price of waste treatment fee is expected to be further increased, Reduce dependence on subsidies.
The new space for incineration in the 14th five year plan is still large, and the CCER market is expected to set sail again in 2022. ① By the end of 2021, the total scale of waste incineration in China reached 750000 tons / day. By the end of March 2022, the 23 provinces and regions that have issued plans are expected to put into operation an incineration capacity of 717000 tons / day in 20182030, with a corresponding investment of 365.7 billion yuan. Most of the new capacity is planned to be put into operation during 20212025; ② Benefiting from frequent policies to accelerate the construction of carbon market, according to the experience of past carbon trading pilot cities, CCER trading is generally started within one year after the official launch of carbon quota trading. China’s CCER market is expected to be open for trading in 22 years. It is estimated that the CCER income of dedu power is 2.4 points, which is expected to contribute to the performance increment of incineration industry at that time.
Actively expand the field of new energy and create a “incineration +” route. In addition to the traditional incineration business, several listed waste incineration companies have expanded the field of new energy and developed new driving forces for performance growth. Among them, ① Zhejiang Weiming Environment Protection Co.Ltd(603568) and merit have cooperated in a 40000 ton high nickel matte project, and the net profit after putting into operation is expected to exceed RMB 1 billion, contributing to the profit increment together with the traditional incineration business; ② It is estimated that the company will acquire Shanghai Pudong Development Bank Co.Ltd(600000) tons of waste batteries and materials in cooperation with the shareholders of Meili group, and Xinli will provide a good source of recycling of nearly 100000 tons of waste batteries / 2021 in 2024 in the annual report; ③ Shengyuan Environmental Protection Co.Ltd(300867) cooperates with the Three Gorges to arrange the offshore wind power project in Fujian Province. Under the background of double carbon target, the future of offshore wind power can be expected. The company has been deeply cultivated in Fujian for many years and has obvious expansion advantages relying on local high-quality offshore wind resources and Three Gorges wind power technology reserve.
Valuation bottom, value depression, high growth and undervalued value need to be repaired. At present, the valuation of the incineration industry is at the bottom, and the average PE of 2021e-2023e industry is only 15.1x, 11.4x and 9.5x. The high growth underestimated value of the sector is expected to reverse at the bottom. Be optimistic about waste incineration companies with strong growth and certainty, and pay attention to Zhejiang Weiming Environment Protection Co.Ltd(603568) (ROE level is leading in the industry, orders are sufficient, and the layout of high nickel matte projects is open for growth), Grandblue Environment Co.Ltd(600323) (layout is large, solid waste growth is steady, and valuation advantages are obvious), Wangneng Environment Co.Ltd(002034) (epitaxial M & A obtains high-quality incineration projects, and the annual output of nearly 10000 tons of cobalt, nickel and lithium salts will be put into operation soon) Shengyuan Environmental Protection Co.Ltd(300867) (excellent historical performance, obvious advantages of offshore wind power expansion in cooperation with the Three Gorges).
Risk tips: 1. The production progress of incineration capacity is less than expected; 2. The development of new energy projects is not as expected and the risk of changes in tariffs and exchange rates; 3. Risks of changes in industrial policies, etc.
