\u3000\u3 Shengda Resources Co.Ltd(000603) 568 Zhejiang Weiming Environment Protection Co.Ltd(603568) )
Performance continued to grow at a high level. The company achieved a total revenue of 4.19 billion yuan (YoY + 34.0%) in 2021; The net profit attributable to the parent company is 1.54 billion yuan (YoY + 22.1%), of which the revenue in 2021q4 is 860 million yuan (yoy-13.3%), and the net profit attributable to the parent company is 340 million yuan (yoy-3.2%). Benefiting from the improvement of project construction and operation scale, the performance maintained a sustained growth trend.
The profit margin declined and the cash flow from operating activities increased. In 2021, the company’s gross profit margin was 47.7% (- 6.4pct) and the net profit margin in the same period was 36.7% (- 3.5pct). The gross profit margin and net profit margin decreased slightly. In terms of sectors, the gross profit of project operation and kitchen waste disposal increased by 3.2 and 5.1pct respectively, and the equipment EPC and waste removal and transportation decreased by 14.1 and 10.3pct respectively; In 2021, the sales expense rate is 0.5% (- 0.2pct), the management expense rate is 2.9% (- 0.0pct), the financial expense rate is 2.7% (+ 0.3pct), and the expense rate remains basically stable; The net cash flow from operating activities was 1.19 billion yuan, an increase of 25.4%, and the cash flow from operating activities continued to grow.
There are enough projects in hand, and the cooperative high matte project opens the second growth curve. In November 2021, the company signed a framework agreement with indigo company to cooperate with its wholly-owned subsidiary merit in the 40000 ton high nickel matte project to explore the new energy field. In January 2022, the company announced that it planned to invest no more than 390 million US dollars in the laterite nickel smelting project with an annual output of 40000 tons of high nickel matte containing metals. The company held 70% of the shares. The long-term trend of high nickel of ternary materials remained unchanged and was optimistic about the medium and long-term demand, We look forward to contributing to the performance increment together with the traditional incineration business. In 2021, the newly signed domestic waste treatment scale was 13000 tons / day. By the end of December 2021, the company had a total design scale of 51000 tons / day of domestic waste incineration power generation projects (including Shengyun environmental protection, Guoyuan environmental protection, equity participation and entrusted operation projects), of which the total design scale of operation and trial operation projects was about 28000 tons / day, and the scale of projects under construction and preparation was about 22000 tons / day. Sufficient production capacity to ensure high growth in future performance. The company has refined management, strong core equipment manufacturing capacity, high project return rate, roe of more than 20%, and is in a leading position in the industry.
The new deal hopes to straighten out the business model, implement subsidies and strengthen the leading advantages. In 2020, a number of policies on subsidies for waste incineration were issued, and new projects were determined by revenue to enhance the certainty of subsidies. The introduction of the new national subsidy policy has improved the subsidy policy as a whole, which is conducive to straightening out the long-term business model of the industry, promoting the healthy and sustainable development of the industry, tightening subsidies, forcing enterprises to improve efficiency through technological innovation and internal potential tapping, and the industry concentration is expected to increase Zhejiang Weiming Environment Protection Co.Ltd(603568) as the leader of waste incineration in private enterprises, the advantages are further strengthened, and the future project expansion is worth looking forward to.
Investment suggestion: as the leader of private waste incineration, the company has excellent management, has the production and marketing capacity of incineration core equipment, and has a high rate of return on the project. At the same time, the company has abundant waste incineration projects in hand and has great performance flexibility in the next few years. We expect the company’s net profit attributable to the parent company from 2022 to 2024 to be RMB 19.9/27.3/3.55 billion respectively, EPS to be RMB 1.5/2.1/2.7 respectively, and the corresponding PE to be 15.8x/11.5x/8.8x respectively, maintaining the “buy” rating.
Risk tips: waste incineration policy risk, operation cost increase risk, project progress is less than expected.
