Dongjiang Environmental Protection (002672): Performance in line with expected capacity acceleration
2019H1 resource-based business dragged down performance growth, and harmless business revenue increased.
The company’s 2019H1 operating income16.
90,000 yuan, 1.
7%, net profit attributable to mother 2.
50,000 yuan, -5 year on year.
1%, the decline was narrowed, and the performance was in line with expectations.
The decline in net profit attributable to mothers was mainly affected by the decline in metal prices and the shrinking demand from downstream companies. The company’s resource business improved, with revenue5.
700 million, an increase of 13.
6%, accounting for 33.
5%, but the performance of harmless business increased significantly, revenue 8.
0 million yuan, 31 year on year.
5%, accounting for 47.
2%, gross profit contribution accounted for more than 60%, for the first time significantly surpassed the resource business, became the company’s largest main business, and further optimized the business structure.
The overall gross profit margin increased, the expense ratio increased slightly, and the net operating cash flow increased significantly.
Thanks to the increase in the proportion of high-margin harmless business, the company’s comprehensive gross profit margin increased by 1 in 2019H1.
1pct to 36.
7%, resource gross margin 26.
4pct), harmless gross margin 31.
The company’s sales expense ratio, management expense ratio and financial expense ratio are 3 respectively.
8 points), 9.
9 pct) increased, mainly due to the fierce competition in the hazardous waste market, the company’s expanded market promotion, and the increase in interest expense after the construction of the project was converted.
2019H1 net operating cash flow is 5.
800 million yuan, up 95.
3%, mainly due to the increase in the volume of hazardous waste business and the return of small loan company customer loans.
The release of production capacity is accelerating, and future volume can be expected.
In the first half of 2019, the company has obtained hazardous waste management qualifications35.
5, of which innocent qualification 14.
3 initially, while the same period last year the company received a total of 7.
As a result, the company ‘s release of hazardous waste capacity has accelerated significantly this year. Under the strong supervision of environmental protection supervision, the prosperity of the hazardous waste industry is relatively high, and the company ‘s capacity is expected to benefit deeply.
As of 2019H1, the company is applying for hazardous waste permit capacity qualification8.
In terms of 9, the capacity under construction is 13.5 is the lowest, and the planned production capacity is 61. It is estimated that by the end of 19, the operating throughput will reach 200 tons. The production capacity will continue to fall, supporting future performance growth.
Equality is straightened out, democracy is improved, and new leadership brings new life.
With the entry of Guangsheng and Huihong Group, the company changed from a private enterprise to a state-owned enterprise. After two years of cultural management, and a new management team was in place at the end of 2018Lingnan Director Yao General Managing Director, we believe that the company’s business management is expected to improve, and the new leader’s years of environmental management and management experience will also help listed companies better. The profitability and speed of advancement of hazardous waste projects in the future are worth looking forward to.
Investment suggestion: Under the strong supervision of environmental protection inspectors, the prosperity of the hazardous waste industry continues to increase, demand continues to show, and the concentration of the industry is expected to increase under the background of rising emission standards.
As an industry leader, Dongjiang Environmental Protection has strong research and development, excellent technology, and hopes to fully enjoy the industry dividends. The company has many years of experience in environmental management and corporate management, which helps to better help the company’s business development.
Expected net profit attributable to mothers in 2019-2021.
30,000 yuan, EPS is 0.
83 yuan, corresponding PE is 22X, 18X, 15X.
The company has a strong competitive advantage and is optimistic about its future development and maintains a “buy” rating.
Risk reminders: The release of production capacity does not meet expectations, the resource utilization makes use of downstream product price fluctuations, environmental protection supervision does not meet expectations, competition intensifies the risk of price wars, hazardous waste storage and transportation and operational safety risks.