The profits of the attributable associates fell, and the main business grew steadily.
China Conch Venture's continuous business in the first half of the year was attributed to the parent company's net profit of 2.43 billion yuan,-30.1% compared with the same period last year. Affected by the fall in cement prices, the company should account for-31.1% of the profits of the associated company compared with the same period last year, which is the main reason for the decline in the company's profits in the first half of the year. After deducting this part of the impact, the core net profit of the company's continuing business was 540 million yuan, + 16.4% compared with the same period last year. Considering the lower cement price assumption, we reduce the profit attributable to the associated company by 32.3% in 2023, the net profit attributable to the parent company by 21.9%, and the target price by 25.8% to HK $26.2, based on the segment valuation method.
Considering the further implementation of the stable growth policy and the public continuation of the healthy development of the cement industry, we expect cement prices to usher in marginal repair in the second half of the year. In addition, we believe that the improvement of the revenue quality of environmental protection business can better support the development of the company in the new business of new energy materials, which has a larger market capacity. Maintain the buy rating.
The environmental protection business is growing steadily, and the quality of revenue continues to improve.
The revenue of garbage disposal business was 3.05 billion yuan, + 14.5% compared with the same period last year. As the epidemic affected the construction progress of some projects, the construction revenue was-12.3% to 1.85 billion yuan compared with the same period last year. However, thanks to the operation of 9 self-built waste incineration projects and the completion of 11 acquisition projects, the operating income was + 115.3% to 1.21 billion yuan compared with the same period last year.
With the increase in the share of sustainable revenue from operations (year-on-year + 18.5pp to 39.5%), the quality of revenue further improved and gross profit margin increased from + 4.3pp to 28.8% year-on-year. Of the 56 waste power generation projects that have been put into operation, 23 projects have been included in the list of renewable energy subsidies, and 5 projects have been audited and are in the stage of publicity.
The company expanded 22 new projects (11 contracted construction projects + 11 acquisition projects) in the first half of the year. The cumulative project put into operation is 32800 tons / day, and the projects under construction and projects to be built are 19600 tons / day, and the project reserves are abundant.
The scale of the contract has basically achieved the 2023 target set by the management.
The positive and negative materials project accelerated, and the lithium battery recycling project accelerated the development of new energy materials business in the first half of the year. The first phase of lithium iron phosphate cathode material project is expected to be put into production in October, and the 40,000 tons / year anode material first phase project is also expected to be put into operation next year. With the increasing demand for power batteries and energy storage, we believe that the development of new energy materials business will provide more space for the company's follow-up development. We believe that the company's advantages in the backwardness of production technology and equipment and the stronger cost control capability brought by the integrated construction of the industrial chain are expected to become the core competitiveness of the company in these two businesses. In addition, the company accelerated the signing of lithium battery recycling projects in the first half of the year, and we expect that with the increase in lithium battery retention and recycling, the company's business development is expected to usher in a sweet harvest in the next 1-2 years.
Risk hint: the project is not advancing as expected; the electricity price subsidy is in place later than we expected.