\u3000\u3 Guocheng Mining Co.Ltd(000688) 087 Shandong Intco Recycling Resources Co.Ltd(688087) )
Key investment points
Event: in the first quarter of 2022, the company realized an operating revenue of 504 million yuan, an increase of 21.61% at the same time; The net profit attributable to the parent company was 49 million yuan, an increase of 14.51% at the same time.
Revenue performance grew steadily, closed production, and the epidemic situation was controllable. 2022q1 company achieved steady growth in operating revenue and net profit, mainly due to the company’s continuous efforts to lay new channels and develop new products, so as to achieve good product sales. Under the influence of negative factors such as repeated covid-19 epidemic and tight supply chain, the company maintained the orderly operation of major production bases and maintained the safety record of “zero infection”. 242 employees of the company’s Shanghai base carried out closed production with stable production status. Domestic sales were promoted by combining online and offline, which was limited by the impact of the epidemic. At the same time, the company’s overseas production base has strictly taken a number of epidemic prevention measures, and its daily production and operation are in normal operation.
Operating cash flow decreased by 34.06% to 58 million yuan. 1) The decrease of cash flow from operating activities of 2022q1 company is mainly due to the increase of other cash payments related to operating activities and wages and salaries; 2) Net cash flow from investing activities was – 117 million yuan, a decrease of 139.86%; 3) The net cash flow from financing activities was 82 million yuan, an increase of 928.47%.
The cost control was good, and the cost rate decreased by 4.11pct to 17.31%. Among them, the rates of sales, management, R & D and financial expenses decreased by 4.87 PCT, increased by 0.42 PCT, increased by 0.31 PCT and increased by 0.02 PCT to 5.27%, 6.52%, 4.89% and 0.63% respectively.
Pet projects under construction will be put into operation steadily. Progress of main projects under construction: 1) Malaysia 50000 T / a pet project: module commissioning is completed as planned, and some products are receiving orders and selling in succession; 2) Vietnam Yingke PS deep processing project: successively carry out plant infrastructure, equipment commissioning, personnel recruitment and other work. 3) 100000 t / a multi category recycled plastics project: it is planned to spend 200 million yuan to purchase the new production capacity of Malaysian land reserve, and it is planned to add 100000 t / a PET / PP / PE multi category recycled plastics project. 4) China’s high-end iron products project with an annual output of 1 million pieces: the project is expected to start in May and be constructed and put into operation in October. After the overseas and Chinese projects are put into operation, it will help the company expand the new product market, seize the first mover advantage and further expand the profit scale.
Expand categories vertically and horizontally, and have obtained GRS, FDA and other qualifications. The company plans to vertically expand the recycling field of PE, PP, HDPE and other multi variety plastics based on the advantageous field of PS / PET, and horizontally expand to the field of multi material resource regeneration. The company has obtained GRS, FDA and other qualification certification. The category expansion and gradual implementation of qualification will help the company enrich product categories, realize incoming material coordination, improve the layout of recycled plastics, expand business scope and open up long-term growth space.
Plastic restriction order carbon neutralization opens the blue ocean market of waste plastics recycling, and the minimum content of recycled materials accounts for the demand. 1) In 2019, the global recycling rate of waste plastics is about 35%, with great room for improvement. 2) The abolition ban drives the reform of the global supply chain and transfers to the Southeast Asian market. 3) The carbon of recycled plastics is reduced by 30% ~ 80% compared with that of primary plastics. 4) The minimum content standard of recycled PET ensures the rigid demand. California of the United States stipulates that the content of recycled plastics in PET bottles will be 15% from 2022. The European Union specifies that the proportion of recycled plastics in PET containers will not be less than 25% by 2025 and 30% by 2030. Major enterprises make voluntary commitments.
Profit forecast and investment rating: the company is a pioneer in recycled plastics, and the project is steadily advancing, which is expected to continue to contribute to growth. We maintain the company’s net profit forecast of 301 / 379 / 462 million yuan from 2022 to 2024, corresponding to 25 / 20 / 16 times PE, and maintain the “buy” rating.
Risk warning: the project is not put into operation as expected, and there are risks of trade policy changes and tariff increases.
