Core views

In 2022, the company achieved revenue of 3,585 million yuan, a decrease of 4.56% over the previous year; achieved net profit of 386 million yuan, a decrease of 1.86% over the previous year; and realized a net profit of 290 million yuan deducted from the mother, an increase of 16.26% over the previous year. The company's new energy sanitation equipment continued to grow. 1,400 new energy sanitation vehicles were insured, an increase of 21.11% over the previous year. The market share reached 28.71%, and the number of new energy sanitation vehicles has been ranked first in the industry for three consecutive years. Affected by macroeconomic fluctuations and the cold in the real estate industry, the company's construction machinery revenue fell 27.98% year on year. In the context of the “double carbon” target continuing to advance, there are still good development opportunities for new energy sanitation equipment. We believe that the company is expected to continue to share the industry's development dividends through its competitive advantage.

occurrences

The company released its 2022 annual report

In 2022, the company achieved operating income of 3,585 million yuan, a decrease of 4.56% over the previous year; achieved net profit of 386 million yuan, a decrease of 1.86%; realized net profit of 290 million yuan, an increase of 16.26% over the previous year; achieved net income of 0.73 yuan per share, a decrease of 0.02 yuan/share over last year; and achieved a weighted average return on net assets of 16.78%, a decrease of 3.06 percentage points from last year.

Brief review

Construction machinery lowered the company's revenue, and sanitation services achieved a year-on-year increase in 2022. The company achieved revenue of 3,585 billion yuan, a decrease of 4.56% over the previous year, mainly due to macroeconomic fluctuations and the cooling of the real estate industry, which led to a decline in the company's construction machinery business revenue. By business, the company's sanitation equipment, construction machinery and sanitation service businesses achieved revenue of 17.84, 9.72 and 701 million yuan respectively, with year-on-year changes of +11.59%, -27.98%, and +15.89%; achieved gross profit margins of 32.34%, 23.25%, and 29.74%, with year-on-year changes of +3.86, -6.56 and +5.35 percentage points over the previous year. The company's sanitation equipment revenue increased, mainly due to the significant increase in sales of new energy sanitation equipment. In 2022, the company achieved net profit of 386 million yuan, a decrease of 1.86% over the previous year; it achieved a net profit of 290 million yuan deducted from the mother, an increase of 16.26% over the previous year. In terms of expenses, the company's sales, management, and R&D expenses rates were 10.18%, 3.04%, and 4.46%, respectively, with year-on-year changes of +0.47, -2.15, and -0.19 percentage points. The company's management expense ratio improved year on year, mainly due to a decrease in restricted stock equity incentive expenses and management team overperformance incentive funds; the year-on-year decrease in R&D expenses ratio, mainly due to a decrease in R&D personnel and a decrease in employee remuneration. In 2022, net cash flow from the company's operating activities was -90 million yuan, a year-on-year decrease of 206.29%, mainly due to reduced sales refunds due to tight government funding and an increase in payments due in 2022.

New energy sanitation equipment continued to grow, and the sanitation service structure was optimized. In 2022, the company achieved sales of 3995 and 743 units of sanitation equipment and construction machinery, a year-on-year decrease of 10.22% and 38.34%. The company's sanitation equipment sales declined year on year, mainly due to tight local finances and a decline in enthusiasm for purchasing equipment; the year-on-year decline in construction machinery sales was mainly due to macroeconomic fluctuations and a decline in industry demand due to macroeconomic fluctuations and the downturn in the real estate industry. In 2022, the company insured 3,931 sanitation vehicles, ranking fourth in the industry; 1,400 new energy sanitation vehicles were insured, an increase of 21.11% over the previous year, and the market share reached 28.71%, ranking first in the industry for three consecutive years. Among them, 107 fuel cell products were insured, with a market share of 49.77%, ranking first in the industry. In 2022, 4,877 new energy sanitation equipment were insured, an increase of 20.3% over the previous year, and the penetration rate of new energy sources was 5.9%. We believe that with the increase in the penetration rate of new energy sanitation equipment, the company's sanitation equipment business will continue to grow. In terms of sanitation services, by the end of 2022, the annual amount of the company's ongoing projects was 82 billion yuan, an increase of 60 million yuan over the previous year. In 2022, in order to strengthen the risk management and control of accounts receivable, the company voluntarily withdrew from some projects with poor payback. In 2022, the sanitation services market showed resilience, and the market size continued to grow. The annualized total amount of tender projects opened nationwide and the total amount of contracts both reached record highs, reaching 82.3 billion yuan and 251 billion yuan respectively, up 14.8% and 15.8% year-on-year. As the overall scale of the sanitation market continues to expand, the company's sanitation service revenue is expected to maintain a steady increase.

Environmental protection policies continue to advance development, technology research and development enhances competitive advantage, and maintains that the “buy-in” rating sanitation industry is strongly influenced by policy factors. The introduction of policies such as the “14th Five-Year Plan” Comprehensive Work Plan for Energy Conservation and Emission Reduction, “Opinions on Further Combating Pollution Prevention and Control”, and the “Action Plan for Carbon Peak by 2030” have set clear goals and guidelines for urban and rural environmental construction, low-carbon transportation and cleaning, waste disposal capacity, etc., and the market size of the sanitation industry is expected to continue to grow. At the same time, the company followed industry trends such as electrification, intelligence, connectivity, decarbonization, etc., and promoted technological innovation. It obtained research results in the fields of intelligent driving technology, fuel cell vehicles, new energy system integration, and pure electric mining vehicles, and established competitive advantages in various fields such as technology leadership, industrial support, and after-sales support. In the context of continuing to advance the “dual carbon” target, we believe that the company can continue to share the industry's development dividends with its competitive advantage and achieve growth in business performance. We expect the company to achieve operating income of 3.823 billion yuan, 4,321 million yuan and 4.941 billion yuan respectively from 2023 to 2025, achieving net profit of 439 million yuan, 492 million yuan, and 558 million yuan respectively. Corresponding EPS is 0.8 yuan/share, 0.9 yuan/share, and 1.02 yuan/share, respectively, maintaining the “buy” rating.