Dongjiang Environmental Protection (002672) quarterly report comment: 19Q1 performance is slightly lower than expected, optimistic about potential expansion in other places

Dongjiang Environmental Protection (002672) quarterly report comment: 19Q1 performance is slightly lower than expected, optimistic about potential expansion in other places

19Q1 The company achieved operating income / net profit attributable to mothers / net profit attributable to non-mothers8.

1/1.

1/1.

0 million yuan, +6% /-11% /-12% at the beginning of the year, of which the main business profit grew steadily by 8% to 2.

US $ 800 million. The net profit attributed to the parent is due to the increase in period expenses (including R & D expenses). The total expenses for the period of 19Q1 were 1.

6 trillion, the cost rate during the period reached 20.

4%, one year +2.

1pct.

At present, the industry continues to be booming. After Dongjiang Environmental Dating Huihong Group as a war investment, it tried to fully rely on Huihong Group’s rapid expansion of hazardous waste production capacity in Jiangsu.

We expect the company EPS to be zero in 2019-20.

61/0.

72 yuan (0 before adjustment.

66/0.

79 yuan), giving the company 24-26xP / E in 2019, corresponding to a target price of 14.

64-15.

86 yuan / share, maintain “Buy” rating.

In 19Q1, the company’s performance of operating income / net profit attributable to mothers / net profit attributable to non-mothers 8 was slightly lower than expected. The increase in expenses during the period was the main reason for the decrease in profits.

1/1.

1/1.

0 million yuan, +6% /-11% /-12% at the beginning of the year, of which the main business profit grew steadily by 8% to 2.

US $ 800 million. The net profit attributed to the parent is due to the increase in period expenses (including R & D expenses). The total expenses for the period of 19Q1 were 1.

6 trillion, the cost rate during the period reached 20.

4%, one year +2.

1pct.
Among them, sales expenses / financial expenses increased by 58% / 39% per year. The competition in the hazardous waste market of the main business was intensified. The company’s growth in market expansion led to increased sales expenses and the increase in reported interest expenses after some projects under construction were resolidified.

In addition, the company’s cash flow is good, benefiting from the increase in net loans to customers of small loan companies and the company’s centralized hazardous cash flow business, which has a better hazardous waste business. In 19Q1, its operating net cash flow exceeded + 496% to 3.

200000000.

The prosperity of the industry is expected to continue. Dating Huihong Group will help expand its capabilities to the end of 2018. The company’s processing capacity will end at about 170, which translates to 60%. It is expected to gradually reach about 180 at the end of 2019, and is expected to further climb to 350 inches in 2020.

At present, the hazardous waste disposal industry is still in short supply, and environmental protection supervision is gradually getting serious. It is expected that the non-compliant treatment capacity will be further eliminated, and the industry’s prosperity is expected to continue.

For reporting equity, Huihong Group and its wholly-owned subsidiary Huihong Venture Capital obtained the company through equity transfer and centralized trading10.

With 63% equity, Huihong Group is a state-owned enterprise in Jiangsu Province. It has strategically invested in Dongjiang Environmental Protection and strengthened its environmental protection business 杭州桑拿网 cooperation.

We believe that Jiangsu ‘s hazardous waste production ranks first in the country and the capacity gap is obvious. After Dongjiang Environmental Protection and Huihong Group have invested in the war, it is expected that Jiangsu will rapidly expand hazardous waste production capacity and increase long-term profitability.

Lowered profit forecast and maintained “Buy” rating. Taking into account the lower-than-expected 19Q1 results, we lowered the profit forecast and expect the company to return to its parent’s net profit for 2019-20205.

37/6.

3.7 billion (5 before adjustment).

83/7.

40,000 yuan), the corresponding EPS is 0.

61/0.72 yuan (0 before adjustment.

66/0.

79 yuan), and dating 2021 EPS0.

83 yuan.

With reference to the average P / E 20x of comparable companies in 2019, but considering the development of the Jiangsu Chemical Industry Park 杭州桑拿 after the explosion to improve the prosperity of the hazardous waste disposal industry, leading companies should enjoy an appropriate premium.

Increase the company’s 2019 target P / E to 24-26x, corresponding to a target price of 14.

64-15.

86 yuan / share, maintain “Buy” rating.

Risk reminder: The project’s production progress is less than expected, the large amount of investment causes the deterioration of cash flow conditions, and the loss of core technical talents.