Summary of events: on October 27, the company released its three-quarter report for 2022. 3Q22 achieved operating income of 1.403 billion yuan, up 2.2% from the same period last year; net profit from home was 271 million yuan, down 19.8% from the same period last year; and net profit from non-return was 262 million yuan, down 21.5% from the same period last year. In the first three quarters, the operating income was 4.261 billion yuan, down 4.7% from the same period last year; the net profit returned to the mother was 860 million yuan, down 21.5% from the same period last year; and the non-return net profit was 842 million yuan, down 22.4% from the same period last year.

The project continued to operate steadily: 3Q22's homing net profit fell 19.8% year on year. In the first three quarters of 2022, the homing net profit decreased by 21.5%, mainly due to the one-time confirmation of subsidies by operating projects and affiliated associates in the same period last year. Excluding this factor, Q3's homing net profit increased by 3.3% compared with the same period last year, and the homing net profit in the first three quarters increased by 20.4%. The growth rate of Q3 net profit is lower than that of the previous three quarters as a whole, mainly due to the fact that the investment income of Q3 company in joint ventures and joint ventures is 36 million yuan lower than that of 131 million yuan in the same period last year. 3Q22 realized the net cash flow of operating activities of 566 million yuan, an increase of 49.0% over the previous month, and the project payback was good.

Abundant production capacity reserves and continuous release of performance: as of June 2022, the company's holding projects have a total operating capacity of about 35000 tons / day, 15 waste incineration projects are under construction and preparation, with a total capacity of 13700 tons / day, and the project reserves are abundant. The company's business integrates waste incineration equipment manufacturing and project operation, and incineration capacity continues to be released, which is expected to lead to the continuous growth of the company's performance.

Investment advice: excluding the impact of subsidies, single-quarter profit growth over the same period last year, project rebate has improved; incineration capacity is gradually released, is expected to lead to performance growth. According to the operating situation of the company, the profit forecast of the company is adjusted. It is estimated that the annual EPS of the company on 22-23-24 will be 0.71 PE 0.74 (the previous value 0.75 Universe 0.85 Plus 0.89 yuan), and corresponding to the closing price of October 27, 2022, the PE will be 10.4 shock 9.5 times. Considering the stable operation of the project as a whole and abundant production capacity reserves, the company will be given 13.0 times PE in 2022, with a target price of 8.45 yuan per share. Maintain the "cautious recommendation" rating.

Risk tips: the progress of project construction and operation is not as expected; the risk of slowing down the growth rate of the industry; the risk of slowing down the speed of being included in the national subsidy catalogue; and the risk that the development of large solid waste business is not as expected.