\u3000\u3000 Road Environment Technology Co.Ltd(688156) (688156)
High water cut waste disposal leading enterprises, many core technologies to build moat: as a high-tech enterprise focusing on high water cut waste disposal and utilization, and traditional business such as river sludge, mud treatment and engineering projects, it is transforming into new business such as Baijiu lees utilization. The company has independently developed a number of core technologies such as mud dehydration and consolidation integration technology and organic residue microbial solid-state fermentation technology, and built a strong moat in the emerging field of resource utilization of high water content waste, especially distiller’s grains. In recent years, the company has strengthened business transformation, rapidly expanded the resource utilization of distiller’s grains, and continuously increased the proportion of revenue, providing support for the future performance growth of the company. As of the third quarterly report of 2021, the company has achieved a revenue of 236 million yuan, a year-on-year increase of 56.94%; The net profit attributable to the parent company was 46 million yuan, a year-on-year increase of 105%.
The utilization of distiller’s grains is the key development direction, and the demand is strong, and the industry is expanding rapidly: the treatment of distiller’s grains in China started late, but the demand is strong, and the treatment of fresh distiller’s grains is difficult. If left unchecked, it is easy to produce mildew and cause pollution; If fed directly, it is easy to cause alcoholism and aflatoxin. The company uses the self-developed microbial solid-state fermentation technology system of organic residue to innocuously treat organic residue around the process links such as microbial solid-state fermentation, continuous multi-stage low-temperature drying and high-density yeast solid culture, so as to produce biological fermentation feed with nutrition, palatability and function, which is helpful to promote feed digestion and absorption, improve metabolism level and improve production performance Regulate body immunity. Chinese Baijiu production in 2020 was about 7 million 410 thousand tons, and 1 tons of Baijiu produced about 3 tons of distillers’ grains. The annual output of distillers grains was about 22 million 230 thousand tons, according to the data released by the National Bureau of statistics. At the same time, from the demand of downstream feed industry, according to the data of China Feed Industry Association, the total national feed output will reach 253 million tons in 2020. In the future, under the policy of limiting and reducing resistance, the demand for bio fermented feed is expected to expand on a large scale. The company’s distiller’s grains resource business segment has broad market space in distiller’s grains treatment market and downstream feed market. At present, the technology of distiller’s grains recycling is mainly around Maotai flavor Baijiu, and the residual starch, protein and fat content of Baijiu liquor is higher than that of Luzhou flavor and Fen flavor distiller’s grains. With the maturity of technology and the improvement of downstream demand in the future, the company is expected to further expand its resource business of Luzhou flavor and light flavor distiller’s grains.
The continuous efforts of the business of distiller’s grains and resource utilization are expected to increase in volume and price. According to the company’s announcement, as at 2021H1, the company’s resource utilization capacity of distiller’s grains is 70 thousand tons, mainly using Maotai flavor Baijiu distillers’ grains as raw materials to produce fermented feed. In November 2021 and January 2022, the company issued a notice of the establishment of a subsidiary company, which will establish Luther’s bio Environmental Technology (sands) Co., Ltd. and Luther’s environmental protection technology (HSIC) Co., Ltd., in which Jinsha company designed and built a Baijiu biological fermentation feed project with an annual output of 150 thousand tons. The first phase of 100 thousand tons is expected to be put into operation in August 2022. Phase II 50000 tons is expected to be put into operation in 2023; The company has designed and built a 80 thousand year fermentation Baijiu biological fermentation feed. The first phase of 50 thousand tons is expected to be put into operation at the end of 2022. The two phase 30 thousand tons are expected to be put into operation by the end of 2023. In 2022 and 2023, the company’s distiller’s grains resource production capacity is expected to reach 110000 tons and 220000 tons respectively. The company produces microbial fermented feed through Baijiu lees as raw material, which is a feed with nutrition and functionality. The protein content is high, which has higher nutritional value than that of ordinary feed. At present, the market price is underestimated, and the future product sales price is expected to increase, and the profitability is further enhanced.
The steady development of traditional business driven by policies: in the treatment of traditional river and lake sludge, engineering mud and municipal sludge, the company adopts the industrialized operation mode and gradually promotes replication in the Yangtze River Delta, the middle reaches of the Yangtze River and other regions. With the promotion of a series of relevant policies such as the 14th five year plan and the ten water policies, river and lake sludge treatment has been paid attention to, and the business demand has been continuously improved. In terms of Engineering mud treatment, according to the announcement of the company, the resource utilization rate of China State Construction Engineering Corporation Limited(601668) waste in 2020 is only 11.55%, which is far from the 50% target value proposed by the state. The mud dewatering consolidation integration technology independently developed by the company has obvious advantages, and has formed a certain competitive barrier in the field of resource utilization of high water content waste. It is expected to achieve steady development under the strong promotion of policies.
Investment suggestion: we expect the company’s revenue from 2021 to 2023 to be 347 million yuan, 506 million yuan and 752 million yuan respectively, with growth rates of 38.5%, 45.8% and 48.6% respectively; The net profits were 71 million yuan, 111 million yuan and 176 million yuan respectively, with growth rates of 49.5%, 55.3% and 58.7% respectively; The investment rating of Buy-A is given for the first time, and the six-month target price is 33.0 yuan.
Risk tip: the policy promotion is less than expected, the downstream feed demand is less than expected, and the market competition is intensified
