20160628-大和证券-粤丰环保-01381.HK-High-quality_waste-to-energy_profile_supports_growth_16页_1mb_1mb
报告摘要
Canvest Environment Protection Group (1381 HK) Summary
Core Content
Canvest Environment Protection Group is a leading waste-to-energy (WTE) provider in China, focused on the development, management, and operation of WTE plants. The company has seen significant growth in its WTE capacity since its listing in December 2014, with its total MSW processing capacity increasing from 6.9ktpd to 15.7ktpd as of 2016. The company's operating capacity is expected to grow further, reaching 9.1ktpd by end-2016/1H17, 11.3ktpd by end-2017/1H18, and 12.8ktpd by end-2018. The company also has a contracted capacity of 15.7ktpd and aims to expand it to 19-20ktpd by 2017.
Main Points
- Target Price: The target price for Canvest has been revised to HKD5.60 from HKD6.00, which corresponds to a PEG of 0.65x and a 2016E PER of 26x.
- Earnings Growth: The company's EPS is expected to grow at a CAGR of 35% for 2015-18E, driven by new capacity additions.
- Valuation: Canvest is currently trading at a 16.4x 2016E PER, which is higher than its peers such as China Everbright International (CEI) and Beijing Enterprises Water (BEW). The DCF-based valuation supports a target price of HKD5.60.
- Project Quality: Canvest's WTE projects have a waste treatment fee of CNY80-110/tonne, which ensures profitability once operational. This is higher than the average of CNY20-30/tonne for some projects, which are less profitable.
- IRR and Profitability: Canvest maintains an equity IRR of 12% for its project selection, higher than its listed peers (CEI: >10%). This is due to its focus on high-quality, upgraded projects (FB-MG) rather than greenfield projects.
- Competitive Advantage: The company has a competitive edge in executing FB-MG upgrade projects, which require less construction time and have a better chance of securing EIA approvals. These projects also benefit from existing waste collection and payment systems, leading to higher operating efficiency and economies of scale.
- Earnings Revisions: Daiwa's 2016-18E EPS forecasts are 3-10% above the Bloomberg consensus, reflecting all announced projects.
- Financial Performance: Revenue and net profit are expected to grow, with a 35% EPS CAGR. The company's financial metrics, such as EBITDA and operating profit, are also projected to improve.
Key Information
- Share Price (27 Jun): HKD3.55
- Share Price Movement: +57.7%
- Market Cap (USDbn): 0.93
- 3m Avg Daily Turnover (USDm): 1.60
- Shares Outstanding (m): 2,034
- Major Shareholder: Best Approach (64.5%)
- EPS Growth (2015-18E): 35% CAGR
- Project Utilization: Canvest's projects are expected to be more profitable due to higher treatment fees and efficient operations.
- Capacity Growth: Operating capacity is expected to increase significantly, with contracted capacity also growing.
- Valuation Metrics:
- 2016E PER: 16.4x
- 2016E PEG: 0.65x
- 2016E Free Cash Flow Yield: 3.3%
Financial Summary (HKD)
| Year to 31 Dec | 2016E | 2017E | 2018E |
|---|---|---|---|
| Revenue (m) | 1,418 | 2,222 | 2,255 |
| Operating Profit (m) | 562 | 769 | 921 |
| Net Profit (m) | 436 | 581 | 675 |
| Core EPS (FD) | 0.216 | 0.286 | 0.332 |
| EPS Change (%) | 58.8 | 32.3 | 16.1 |
| Daiwa vs Cons. EPS (%) | 3.3 | 6.2 | 9.8 |
| PER (x) | 16.4 | 12.4 | 10.7 |
| Dividend Yield (%) | 0.9 | 1.6 | 1.9 |
| DPS | 0.032 | 0.057 | 0.066 |
| PBR (x) | 2.5 | 2.2 | 1.9 |
| EV/EBITDA (x) | 12.3 | 9.6 | 8.1 |
| ROE (%) | 16.8 | 18.7 | 18.6 |
Project List
| WTE PROJECT | Phase | Type | Province | Location | Commercial Operations | Waste Treatment Fee (CNY/tonne) | Capacity (tpd) |
|---|---|---|---|---|---|---|---|
| Eco-Tech | I | BOO | Guangdong | Dongguan | Oct-15 | 110 | 1,800 |
| Kewei | I | BOO | Guangdong | Dongguan | Nov-12 | 89 | 1,800 |
| China Scivest | I | BOT | Guangdong | Dongguan | Aug-14 | 110 | 1,800 |
| Zhanjiang | I | BOT | Guangdong | Zhanjiang | Apr-16 | 82 | 1,500 |
| Xingyi | I | BOT | Guizhou | Xingyi | 2H16 | 85 | 700 |
| Eco-Tech II | II | BOO | Guangdong | Dongguan | 1H17 | 110 | 1,500 |
| Laibin I | I | BOT | Guangxi | Laibin | 2017 | 95 | 1,000 |
| Qingyuan I | I | BOT | Guangdong | Qingyuan | 2018 | 50* | 1,500 |
| Beiliu I | I | BOT | Guangxi | Yulin | - | 83 | 700 |
| Beiliu II | II | BOT | Guangxi | Yulin | - | 83 | 350 |
Note: In the process to raise this to above CNY90/tonne for the second year of operation
Key Ratios
| Year to 31 Dec | 2016E | 2017E | 2018E |
|---|---|---|---|
| Sales (YoY) | 19.7 | 56.7 | 1.5 |
| EBITDA (YoY) | 43.3 | 39.1 | 18.6 |
| Operating Profit (YoY) | 47.4 | 36.9 | 19.7 |
| Net Profit (YoY) | 60.4 | 33.2 | 16.1 |
| Core EPS (YoY) | 58.8 | 32.3 | 16.1 |
| Gross-Profit Margin | 43.3 | 39.1 | 44.4 |
| EBITDA Margin | 50.5 | 44.9 | 52.4 |
| Operating-Profit Margin | 39.6 | 34.6 | 40.8 |
| Net Profit Margin | 30.8 | 26.2 | 29.9 |
| ROAE | 16.8 | 18.7 | 18.6 |
| ROAA | 8.7 | 9.3 | 9.4 |
| ROCE | 13.0 | 14.0 | 14.5 |
| ROIC | 13.2 | 13.4 | 13.6 |
| Net Debt to Equity | 55.6 | 68.9 | 60.3 |
| Effective Tax Rate | 11.0 | 12.0 | 12.0 |
| Accounts Receivable (days) | 46.5 | 43.6 | 54.6 |
| Current Ratio (x) | 0.8 | 0.7 | 0.7 |
| Net Interest Cover (x) | 7.8 | 7.1 | 6.0 |
| Net Dividend Payout | 15.0 | 20.0 | 20.0 |
| Free Cash Flow Yield | n.a. | n.a. | 3.3 |
Recommendations
- Buy (unchanged): The recommendation remains unchanged, as the company's growth outlook and project quality continue to support its valuation.
- Main Risk: An unexpected slowdown in securing new WTE projects could impact the company's growth trajectory.
- Competitive Edge: Canvest's ability to secure high-quality FB-MG upgrade projects gives it a competitive advantage over peers focusing on greenfield projects.
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