China Everbright green environmental biomass power generation and hazardous waste treatment

   China Everbright green environmental biomass power generation and hazardous waste treatment

The development of environmental protection industry in the field of the leader. We believe that Everbright Green can take advantage of China's increasing demand for biomass power generation and hazardous waste disposal. On the one hand, in the biomass industry with good policy support, coupled with the company's unique integrated project model, we believe that the company can maintain the leading position in the biomass power generation industry. On the other hand, with the tightening of environmental policy, we believe that the next three to five years of waste disposal needs will remain strong. The company's project reserves have been higher than the industry, we believe that the company through a stronger project execution and continuous access to new projects, among the industry come to the fore.

"Thirteen five" planning period, biomass power generation is full of new opportunities. The National Energy Board has recently revised the target for biomass power generation, which we consider to be a mid-term positive factor for the industry. According to the recently issued guidelines for the implementation of new energy, the National Energy Board will be the end of 2020 the target of biomass raw material power generation from 7GW raised to 13.1GW. Among them, the Everbright Green environmental layout more East and Central China's installed targets were raised 52% and 82%. We expect Everbright Green will continue to look for new opportunities in the rapid development of biomass power generation in China.

2016-19 year forecast net profit compound annual growth rate as high as 28.3%. For the sake of conservatism, our forecast only covers new projects with the expected start-up schedule in the current project reserve. This explains why we estimate the slowdown in revenue and profit growth in 2019. We forecast that Evergreen Green's net profit will rise from HK $ 866 million in 2017 to HK $ 1,329 million in 2019, representing a compound annual growth rate of 28.3% during the 2016-19E period.

The first increase to give the purchase rating: We use the sub-valuation method to calculate the Everbright Green's target price of 6.80 Hong Kong dollars. We believe that Everbright Green has gained considerable potential for valuation gains. The company's current share price is equivalent to 2017/18 forecast earnings ratio of 13 times / 10 times, and forecast earnings per share growth of 37.6% / 30.8%, we believe that valuation is attractive. In addition, the company has announced the 17-year interim results, medium-term net profit to our 17 fiscal year net profit forecast of about 50%. If the company's operating results are expected, we believe that earnings forecasts have the opportunity to increase. In addition, due to the large green green listing time is short, traceable track record less, we understand that investors may be conservative on the company. However, we expect the company to gradually increase the valuation of the project under the project delivery, the renewal of the project reserves and the improvement of the operation. We first cover Everbright Green, give buy rating.