\u3000\u3 Shengda Resources Co.Ltd(000603) 588 Beijing Geoenviron Engineering & Technology Inc(603588) )
Event overview: on April 27, the company released its 2021 annual report, realizing an operating revenue of 7.827 billion yuan, a year-on-year increase of 14.65%; The net profit attributable to the parent company was 726 million yuan, a year-on-year increase of 32.03%; Deducting the net profit not attributable to the parent company of 688 million yuan, with a year-on-year increase of 26.85%, it is proposed to distribute a cash dividend of 0.70 yuan for every 10 shares to all shareholders and increase the share capital by converting the capital reserve into 2 shares for every 10 shares. The company released the first quarter report of 2022, realizing an operating revenue of 1.566 billion yuan, a year-on-year increase of 23.84%; The net profit attributable to the parent company was 170 million yuan, a year-on-year increase of 42.85%; Net profit deducted from non parent company was 170 million yuan, with a year-on-year increase of 39.42%.
Rapid development of resource-based business and multi field layout: in 2021, the company's resource-based utilization sector disposed 384000 tons of all kinds of solid and hazardous wastes, and produced 80300 tons of recycled metal products. The operating income of the sector reached 3.494 billion yuan, a year-on-year increase of 155.70%, and the gross profit margin was 13.65%, a year-on-year decrease of 12.62 percentage points. The main reason is that the company purchased and stored a large number of resource-based raw materials in the current period, which reduced the gross profit space to a certain extent. In 2021, the company acquired Jiangxi Xinke environmental protection, Chongqing Yaohui environmental protection, jinchangxin Shengyuan, Jinchang sine wave and other projects to further extend the industrial chain. The company's resource utilization business involves many fields such as metal, rubber, plastic and glass. By the end of 2021, the scale of resource utilization, operation and projects under construction had reached 1026400 tons / year.
The proportion of operating assets was further increased, and the cash flow was abundant: in 2021, the revenue of the whole solid waste treatment operation service, including the resource utilization of solid waste, domestic waste treatment and harmless treatment of solid waste and hazardous waste, reached 4.786 billion yuan, a year-on-year increase of 138.65%, accounting for 61.15% of the total revenue, and the gross profit margin was 21.55%, of which the gross profit margin of domestic waste treatment was 44.00%, maintaining a high level. In 2021, the net cash flow generated from the company's operating activities was 607 million yuan, a year-on-year decrease of 44.26%, which was mainly affected by the increase of raw material investment in the resource sector, the change of project payment collection and environmental remediation industry policies. In the first quarter of 2022, the net cash flow generated by the company's operating activities was 303 million yuan, and the payment collection of the project was in good condition.
Abundant reserves of environmental remediation projects: in 2021, the revenue of environmental remediation engineering business was 865 million yuan, a year-on-year decrease of 46.52% and the gross profit margin was 30.97%, which was mainly due to the company's strengthening the audit of environmental remediation orders in terms of project profit margin and the owner's ability to perform and pay, and voluntarily giving up orders that failed to meet the requirements. In 2021, the amount of new environmental remediation orders was 1.468 billion yuan, a year-on-year increase of 14.53%, and the project reserves were rich. In the hand orders, key projects such as the remediation project of contaminated soil in the plot of Wuhan valve factory and the contaminated site of the original site of Xuzhou Hanbang Tire Co., Ltd. were promoted as planned.
Investment suggestion: the resource-based business is developing rapidly, and the multi field layout provides the driving force for sustainable growth; The proportion of operating assets increased, and the cash flow support was guaranteed; The traditional advantageous environmental remediation business has rich project reserves and is ready to go. According to the business operation, adjust the profit forecast of the company. It is expected that the EPS in 22 / 23 years will be 0.86/0.98 yuan respectively (the previous value is 0.90/1.02 yuan), and the EPS forecast value in 24 years will be 1.19 yuan, corresponding to the closing price of PE on April 27, which is 16 / 14 / 11 times respectively. With reference to the company's historical valuation and the valuation level of comparable companies in the same industry, the company was given a PE of 18 times in 22 years, with a target price of 15.45 yuan / share, and maintained the rating of "prudent recommendation" of the company.
Risk tips: 1) industry policy risk; 2) Industry competition intensifies; 3) Price of raw materials and products.
