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Weiming Environmental Protection (603568): a benchmark for fine operation collaboration in the entire industrial chain of domestic waste

Weiming Environmental Protection (603568): a benchmark for fine operation collaboration in the entire industrial chain of domestic waste

Investment summary: The company started its equipment and focused on waste power generation for 20 years, with a ROE of 24%.

The company started independent research and development of incinerator grate in 1998 and continued to optimize it to more moderate domestic waste quality, low cost and excellent performance. The first project has been operating stably for 20 years and has accumulated valuable experience.

From 2017, the revenue and profit growth of operators and equipment under two-wheel drive have moved into the fast lane. Gross profit margin and ROE have maintained 60% and 24% respectively, ranking first in the environmental protection industry, with excellent cash flow and good control of three fees.

The company’s waste-to-energy business market share is 69% 杭州桑拿 in Wenzhou, 36% in Zhejiang, and 3% -5% in the country, ranking first in the industry.

It has been calculated that the company’s basic Zhejiang project has an IRR> 15% and an IRR outside the province> 10%, which has been leading the industry.

The income-side advantage lies in grasping the core area of Zhejiang-production capacity, ton of power generation, and high disposal costs. Jiangxi is the second core with BOO as the main core, and all projects have signed price adjustment mechanisms.

The cost-side advantage lies in: core equipment self-production, refined management, and strong control over construction progress.

The company’s waste-to-energy performance in the next two years is highly flexible, which has a long-term competitive advantage.

It has been agreed that waste incineration is the most suitable method of disposal.

The industry’s total investment in 2019 reached a record high of 67 billion yuan. It is estimated that the country’s new capacity will be about 36 per day in 2019-2021, with a CAGR of 24%.

In 2020, the annual order of assessment will not decrease, and all provinces will introduce mid- and long-term plans to strive for “zero landfill”. The capacity gap in cities in the central and western regions is huge, and the incineration rate in county cities is only 16%.

The company signed a new one in 2019.

07 wt / d ranks first among A-share comparable companies, with on-hand / operating capacity2.

3x, 38% elasticity in production in 2020.

The company resists replenishment, and adapts to the gradual improvement of environmental protection. The concentration in the industry is constantly increasing, and the Matthew effect is prominent.

Vertical and horizontal synergy of large solid waste is a long-term strategy, and equipment sales are gaining momentum.

The kitchen waste treatment benefited from the high growth of African swine fever and waste classification. The company has 1,200 tons / day in hand and cooperated with incineration to reduce costs and increase efficiency.

5600t / d for hand sanitation clearance, including 2850t / d for Wenzhou, will gradually improve the terminal operation quality.

Leakage and fly ash construction operations “small and beautiful” are quickly replicated.

In 2019, more than 400 million orders have been obtained for the export of equipment. Active expansion of production lines for domestic and overseas sales layout is expected to become a new aspect of performance flexibility.

Investment strategy: We are optimistic that the company, as a private leader, has high profitability of existing projects, excellent cash flow guarantee for efficient expansion, cost control and fine-grained operators to build county-level market barriers, and future equipment sales.

It is expected that the company will achieve net profit attributable to mothers in 2019-2021.

8, 13.

5, 18.

0 million yuan, the current expected corresponding PE is 27x, 20x, 15x, we give a 6-month target price of 35-39 yuan, converted into investment value, covering the “buy” rating for the first time.

Risk reminder: the risk of the national subsidy downhill policy; the progress of the waste-to-energy project is less than expected; the profitability of off-site projects is less than expected; a new single-scale scale.

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