On the 2022/01/06, Wang Lei of Zhongtai Securities Co., Ltd. conducted research on Luther Environment and released the research report “Transforming and Empowering Nugget Organic Waste to Resource a New Blue Ocean”. This report gave a buying rating for Luther Environment. The current stock price is 19.99 yuan.

　　Lutheran Environment (688156)
　　Report summary
　　Focus on the treatment of waste with high water content, and become a leading enterprise in the field of resource utilization segmentation. The company was founded in 2006 to explore the path of industrialization of technologies such as river and lake silt, municipal sludge, and industrial sludge through independent research and development of an integrated technology system for mud dehydration and consolidation. Subsequently, it entered the stage of rapid replication and expansion, increased the strategic layout, and the scale of revenue increased markedly. In 2014, a strategic transformation was carried out, and the focus was shifted to preparing a sludge treatment center and a lees feed project, increasing profitability. At present, the company has a complete technological innovation R&D system, with first-class environmental engineering contracting qualification, Hubei Enterprise Technology Center, Hubei Engineering Research Center, etc. It has successively won many honorary awards such as 1 national torch plan, 2 national key new products, 4 provincial science and technology progress awards, 10 Hubei scientific and technological achievements, 105 national patents, etc., and has successfully operated projects such as Shaoxing Qianqing, Shaoxing Fuquan, Wenzhou Ouhai, Wenzhou Lucheng, Changzhou Jintan, Wuhan Qingshan, and Xiangyang. Become a leading enterprise in the field of brands and segments with high popularity and influence in the industry. The company's total revenue for the first three quarters of 2021 was 236 million and net profit of 49 million yuan, up 56.94% year-on-year from the same period last year. River and lake sludge treatment business operations were gradually reduced due to the epidemic, and the company increased its market development efforts and sales revenue in the field of resource utilization of liquor lees.
　　Innovation is leading to a shift in strategic focus, and waste recycling is expected to grow rapidly. Fresh white wine lees have high fiber content, low energy value, low nutrient utilization efficiency, poor palatability, and environmental pollution caused by deterioration and breeding large amounts of aflatoxins. Direct rough processing as feed can lead to livestock safety and ultimately lead to food safety issues. The company caters to the “anti-resistance reduction” policy and uses the core technology of microbial solid-state fermentation of organic residue, which can effectively improve the utilization rate of lees, produce microbial fermented organic feed with nutritional, functional and palatability, and at the same time improve intestinal microbial balance and enhance animals' productivity and immunity. Furthermore, food waste is turned into treasure through biotechnology, and high-quality protein is obtained by cultivating insects using biogas residue. On the one hand, food waste can be treated safely and environmentally friendly, and on the other hand, cultivated insects have high economic value. The by-product bug sand is a high-quality organic fertilizer. The share of food waste in China has always been at a high level. With the nationwide promotion of garbage sorting and the continuous introduction of corresponding policies, market space in the field of food waste disposal will open up one after another in the future. Organic waste recycling has become a new blue ocean. There are few large enterprises in the industry segment. The company is seizing market opportunities and rapidly promoting the organic waste recycling business. It has outstanding technological innovation capabilities, and the revenue growth of the waste treatment business is strong, and it is expected that it will seize the first-mover advantage to expand its market share.
　　The environmental protection business is stable thanks to the dual support of policy guidance and technical system. River and lake sludge, engineering sludge, municipal sludge, organic sludge, and industrial sludge are areas that the country currently focuses on environmental protection management. China has a large sludge stock, sludge treatment started late, and the market space is large. The country's investment in environmental management is increasing year by year. The market potential is high. The upstream and downstream industries of high-water waste are involved in a wide range of industries, and market demand is stable. Years of R&D investment and technological innovation have formed a stable core technology architecture system. Self-developed technology has obvious advantages, forming a patent protection system. Efficient factory operation and highly replicable innovation models drive the rapid expansion of the company's business.
　　Investment advice: The company's revenue is expected to be 3.50, 5.33, and 737 million yuan respectively in 2021-2023, up 39.60%, 52.46%, and 38.34% year-on-year, and net profit to mother of 0.69, 1.20, and 181 million yuan respectively, up 44.08%, 74.57%, and 51.19% year-on-year respectively; corresponding EPS is 0.75, 1.31, 1.98, and PE is 26.42, 15.14, and 10.01 times, respectively. The company has been deeply involved in the field of waste treatment with high water content for many years, and has a mature technical system. At the same time, it has benefited from the national pollution control policy, feed “prohibition”, and “resistance reduction and resistance limit” policy in the aquaculture industry. The sludge treatment market is stable and gradually enters the blue ocean of waste treatment. As a listed company with waste recycling currently scarce in the market, it is expected to maintain a rapid growth trend. First coverage, giving a “buy” rating.
　　Risk warning: There is a risk that policy progress falls short of expectations, macroeconomic progress exceeds expectations, market competition intensifies, project progress falls short of expectations, industry estimates are based on certain assumptions and assumptions, and there is a risk that they will fall short of expectations.

According to the Securities Star valuation analysis tool, Luther Environment (688156) has a good company rating of 2 stars, a good price rating of 2 stars, and a comprehensive valuation rating of 2 stars. (Rating range: 1 to 5 stars, maximum 5 stars)