Fuchun Environmental Protection (002479) Interim Report Comments: Interim report performance increases by 10 per year.

20% increase in thermal power business gross margin by 5PCT

Fuchun Environmental Protection (002479) Interim Report Comments: Interim report performance increases by 10 per year.

20% increase in thermal power business gross margin by 5PCT

Core point: Interim report revenue growth for ten years.

9%, performance increased by 10 per year.

20% of the companies disclosed the 2019 interim report, and the company achieved revenue of 15 in the first half of the year.

890,000 yuan (ten years +14.

92%, the same below), mainly due to the increase in revenue of new materials companies, attributed to the net profit of the mother1.

3.4 billion (+10.

20%), the difference between performance growth and revenue growth is mainly due to the decline in the company ‘s cold rolled steel coil and other business gross profit margins leading to the company’s overall gross profit margins.

9% carbon monoxide 1.

3 units.

As of June 2019, the company has monetary funds in hand13.

8.5 billion, an increase of 63 in the beginning of the year.


  The gross profit margin of the thermal power business increased by up to 5 percentage points, and the gross profit contribution rate reached 82.

The 2% thermal power business is still the core driving force for the company’s profit growth, with a total revenue of 9 in the first half of the year.

6.2 billion (-11.

67%), gross profit reached 2.

4.8 billion (+11.

74%), the gross profit contribution rate further increased to 82.

2%, benefiting from factors such as falling raw material costs, combined heat and power gross margin of 25.

7% increase 5 budgets.

In the end, the company’s installed power generation capacity was 292.

5MW, heating capacity 2820 steam tons / hour.

  Focusing on shutting down and integrating regional production capacity, and acquiring Perrin Energy to enter a different location to expand the Fuyang Park cluster Samsung Thermal Power has ceased production. The companies in the park originally responsible for heating will be supplied by the company’s headquarters and Qingyuan Ecological Heating. The company is expected to absorb and integrate regional production capacity.

In addition, the company announced in August that it intended to use cash.

500 million shares acquired 85% equity interest in 西安耍耍网 Borui Energy. Borui Energy currently has 7 combined heat and power projects, of which the Taizhou Lingang project has been completed and put into operation, with a heating capacity of 450 steam tons / hour and an installed power generation capacity of 30MW.

According to the approval of the project environmental assessment, the company’s thermal power capacity will be close to 6000 steam tons per hour after the above projects are completed and put into operation.

The four Borui Energy projects are located in Jiangxi. The company is expected to make acquisitions and acquisitions to move out of Jiangsu and Zhejiang, and further expand the off-site combined heat and power distribution.

  Regional consolidation + capacity release has driven profit recovery. Maintaining a “Buy” rating does not take into account the acquisition of Porex Energy Distribution. We expect the company’s EPS for 2019-2021 to be 0.

37, 0.

47 and 0.

56 yuan / share, corresponding to the latest PE of 17 respectively.

6, 13.

9, 11.

5 times.

For prudence we give a 20x PE estimate for 2019, corresponding to 7.

A reasonable value of 31 yuan / share, the company has abundant cash on hand, “local integration + off-site expansion” continues to advance, and the layout of waste incineration power generation is inserted into the field of solid waste tailing disposal. Large-scale repurchase highlights confidence and maintains the “buy” level.  Risks suggest that fluctuations in heat demand will lead to changes in profit margins; the project’s expansion of production will gradually exceed expectations; higher environmental standards will lead to higher operating costs; and there is uncertainty about asset impairment.