Dongjiang Environmental (002672) Matters Comment: Although performance growth is less than expected, optimistic about subsequent capacity release will boost profit

Dongjiang Environmental (002672) Matters Comment: Although performance growth is less than expected, optimistic about subsequent capacity release will boost profit

Event: On February 28, Dongjiang Environmental Protection released its 2018 performance report.

In 2018, the company achieved operating income of 32.

97 ppm, an increase of 6 per year.

36%; net profit attributable to mothers4.

69 ppm, a decrease of 13 per year.

69%; realized basic income of 0.

47 yuan.

Opinion: “Three fees” exceeded expectations growth and asset impairment dragged down performance.

According to the company announcement, in response to the rapid development of the environmental protection industry and fierce competition, the report intensified the company’s expansion of the market and strengthened the company’s business brand promotion and management. As a result, the selling expenses and management expenses increased, and the financial expenses also exceeded expectations.
In addition, in the case of downward pressure on the overall economic prospects, the company intends to make provision for impairment of some assets other than goodwill based on the principle of prudence in accordance with relevant regulations such as 杭州桑拿网 accounting standards.

The new production capacity is still in the climbing stage, and future volume can be expected.

In order to cope with the market demand for hazardous waste disposal, the company accelerated the project construction progress in 2018, and the expansion project expanded and reached the expected usable state.

However, due to the intensified market competition, due to the cumulative climb of some completed projects and the slow increase in profit contribution, the company’s main business of hazardous waste disposal revenue growth exceeded market expectations.

We believe that through the in-depth promotion of key measures for hazardous waste management, such as the “Waste Removal Action 2018” and environmental protection inspections, the market prosperity will continue to increase, the company’s new production capacity will be fully released, and the boots will boost the company’s performance.

Hazardous waste disposal leader with stable cash flow.

The long-term company has expanded its operations through new establishments, mergers and acquisitions, and other methods to form an industrial layout that covers the Pan-Pearl River Delta, the Yangtze River Delta, and the central and western regions with industrial and urban waste innocuous treatment and resource utilization as its core business.

By the end of 2017, the company had about 160 hazardous waste treatment qualifications.

According to Wonder Data, among the Shenwan Environmental Engineering Company, Dongjiang Environmental’s operating cash flow net performance was good, in 2016, 2017, and 6 in the first half of 2018.

9 billion, 6.

7.1 billion, 2.

9.8 billion, ranked fifth, fifth and fourth respectively.

The coaching change is complete, and uncertainties are reduced.

In September 2018, the company announced that Chairman Liu Ren resigned, and he will no longer hold any positions in the company.

On November 12, 2018, the company’s board of directors elected Tan Kan as the new chairman.

Earnings forecast and rating: Based on the company’s latest equity, we expect the company’s EPS for 2018-2020 to be zero.

46 yuan, 0.

57 yuan, 0.

70 yuan.

According to the closing price of 2019-03-01, the corresponding PE is 26, 21 and 17 times respectively, maintaining the “overweight” level.

Risk factors: intensified competition in the industry; excessive emissions by subsidiaries; the projects under construction cannot be put into operation as scheduled; the receivables cannot be recovered on schedule.