High-Energy Environment (603588): Leading strength in soil remediation leads to solid waste layout improvement

High-Energy Environment (603588): Leading strength in soil remediation leads to solid waste layout improvement
Key points of investment: Leading soil remediation with significant competitive advantages.In August 2018, after the Soil Law, the demand for soil remediation market accelerated, and the number of orders increased significantly in the second half of the year.We believe that the rural soil remediation market is in the early stages of opening and that policy and fiscal stimulus are significant.On the basis of nearly 20 years of research and engineering experience in Europe and the United States in the upper part of Europe and the United States, the research results and technologies of soil remediation have resumed rapid development.In 2019, frequent explosions in the chemical industry parks have given rise to the introduction of improvement plans for the chemical industry, which is expected to bring more than 30 billion industrial site repair needs.At the same time, the government’s awareness of exemptions has been further improved, which will help accelerate the release of market demand.As a leader in the soil remediation industry, the company has complete technical reserves and leading R & D capabilities. It has undertaken repair work for many demonstration projects and has been highly recognized by the owner. We believe that the company has achieved a single capability surpass in the field of soil remediation, and it is expected that the business is expected to maintain an annual growth rate of 35%. Hazardous waste under construction projects have room for capacity improvement.The company has been conducting hazardous waste layout since 2014, and currently has an operational capacity of 59.83 lowest exchange rate / year, and 23 lowest exchange 南京桑拿论坛 rate / year of capacity under construction, ranking the forefront.We analyze the supply and demand of hazardous waste disposal in the vicinity of the company’s capacity under construction, and we can find that Leshan, Liangshan Prefecture, and Qinglan hazardous waste are all in corresponding areas with insufficient capacity, and there is room for future capacity release. The capacity of waste incineration is expected to increase significantly.In the field of domestic waste disposal, the company’s Hetian, Liyang and Yueyang projects under construction are expected to be put into operation in 2019. By then, the company’s waste incineration operation capacity will be increased to 4,900 tons / day. Increasing operating income will also improve the stability of the company’s cash flow. Higher operating stability in the short term.Although the company’s asset-liability ratio is currently at a relatively high level, subsequent conversion of convertible bonds will reduce the company’s debt ratio.At the same time, the company has no long-term debt maturity in 2019, and should only pay interest on the bonds, with little redemption pressure.The company still has $ 600 million of green debt quota unused, and the balance of monetary funds at the end of the first quarter was 11.US $ 3.3 billion, and the business model of the incineration project is mature. It is easier to finance through project loans, and it can extend short-term repetition. It can cover about US $ 2 billion in capital requirements. It has high operating stability in the short term.In the future, the company’s newly added 3,200 tons / day of domestic waste incineration capacity and reconstruction and expansion of hazardous waste projects will enter the capacity climbing stage to bring stable operating cash flow and reduce the company’s cash flow pressure. Profit forecast, estimation analysis and investment advice: We believe that the three major business areas of the company’s environmental restoration, hazardous waste disposal, and domestic waste incineration have a high degree of prosperity. At present, the average value of on-hand orders in the three major areas of the company is sufficient to support the company.The growth in the next two years is expected to be 0 for the company’s EPS in 19-21.61\0.76\0.95, corresponding to the company’s closing price of 10 on July 25.33 yuan, PE for 19-21 is 16 respectively.92\13.58\10.85.We combined the absolute and relative estimates, and concluded that the company expected a reasonable estimate interval of 12.20-14.64 yuan, maintain “Buy” rating. Risk reminder: The release rate of the soil remediation market is slower than expected, the company’s supplementary orders are smaller than expected, the company’s project progress is lower than expected, and debt and financing risks.