\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 217 China Resourcesand Environment Co.Ltd(600217) )
Key investment points
Event: in 2021, the company realized an operating revenue of 3.469 billion yuan, with a decrease of 1.25% after adjustment; The net profit attributable to the parent company was 309 million yuan, with a decrease of 29.37% after adjustment. In the first quarter of 2022, the operating revenue was 711 million yuan, a decrease of 8.63% after adjustment; After adjustment, the net profit is RMB 1.685 billion, the same as that of the parent company.
The reduction of dismantling subsidies affected the income, and newly merged Yineng company. In 2021, the company acquired 100% equity of Yineng company and improved the recycling network of waste household appliances. The decline of the company’s profit in 2021 is mainly due to 1) the reduction of the subsidy standard of waste power dismantling fund affects the subsidy income, and the reduction range of most varieties is more than 30%; 2) The purchase price of raw materials rose. In terms of business, 1) waste power disassembly: the revenue in 2021 was 2.538 billion yuan, a decrease of 5.83% and the gross profit margin was 27.68%, a decrease of 8.16 PCT. 2) Industrial solid waste: in 2021, the income was 928 million yuan, with an increase of 13.47% and a gross profit margin of 15.75%, with a decrease of 5.9 PCT. The profit of 2022q1 is still affected by the adjustment of subsidy standard (the new standard will be implemented from April 1, 2021). In addition, covid-19 epidemic is repeated, and the company’s waste power disassembly and solid waste disposal are reduced.
Subsidies were withdrawn and operating cash flow improved significantly. In 2021, the net cash flow of the company’s 1) operating activities was 379 million yuan, an increase of 79.06% at the same time, mainly due to the increase in subsidies received from the waste power dismantling fund; 2) Net cash flow from investing activities was RMB -84 million, with a decrease of 32.35%; 3) The net cash flow from financing activities was 151 million yuan, an increase of 230754%.
Subsidies were adjusted and the industry was cleared, leading advantages were solidified and the share was increased. We believe that the adjustment of subsidy standard is expected to be favorable to the recycling end in the short term, which will effectively improve the fund gap of subsidy fund and speed up the payment of subsidies in the long term. Subsidy adjustment & under the trend of stricter environmental protection supervision, the backward production capacity of the industry is facing further liquidation. The company is expected to adjust the subsidy to the recycling end at a favorable price by virtue of the cost advantage brought by the strong recycling channel network, improve the high-value comprehensive utilization level of disassembled materials, and realize the double increase of disassembly share and profitability. In November 2020, the national development and Reform Commission and the general supply and Marketing Cooperative released the special action for dismantling and improving the quality and efficiency of waste household appliances, pointing out that the dismantling capacity of the supply and marketing system will be increased by 50% and the market share will be increased to 35%. By 2021, the company’s waste power dismantling capacity will reach 31.88 million units, and the annual dismantling volume will exceed 20 million units for the first time, accounting for more than 20% of the total dismantling volume of enterprises included in waste power subsidies, Relying on the advantages of capital, capital and channel, the company has great room to improve the scale and share of disassembly.
The integrated governance of shareholders is perfect, and the improvement of the group’s operating ability can be expected. In February 2023, 38% of the equity of the central holding company of renewable resources was changed from a wholly-owned shareholder of the central holding company to a wholly-owned subsidiary of the central holding company of renewable resources, and the proportion of renewable resources was changed from a wholly-owned shareholder of the central holding company in 2023. With the gradual improvement of the company’s shareholder structure, it is expected to promote the integration of incentive mechanism and high-quality assets in the future, and the improvement of the group’s operating ability can be expected.
It is planned to raise no more than 948 million yuan by issuing non-directional shares to help the transformation, upgrading and expansion of waste power dismantling projects. As of April 2022, the issuance plan has been approved by the China supply and Marketing Corporation, and the application materials have been accepted by the CSRC. It can be implemented only after being approved by the CSRC.
Profit forecast and investment rating: considering the adjustment of the fund subsidy standard, the impact of the epidemic and the upward cost, we lowered the forecast of the company’s net profit attributable to the parent company from 463 / 582 million yuan to 356 / 441 million yuan in 20222023. It is estimated that the net profit attributable to the parent company in 2024 will be 545 million yuan, and the current market value corresponds to 17 / 14 / 11 times of PE in 20222024, maintaining the “buy” rating.
Risk tip: the improvement of capacity utilization did not meet expectations, the distribution of subsidy funds did not meet expectations, the implementation of policies did not meet expectations, and the industry competition intensified.
