Summary of events: on August 17, the company released its mid-2023 report that in the first half of 2023, operating income reached 2.98 billion yuan, an increase of 4.30% over the same period last year; net profit from home was 633 million yuan, up 7.34% from the same period last year; and net profit from non-return was 606 million yuan, up 4.52% from the same period last year. In the second quarter, the company achieved operating income of 1.434 billion yuan, an increase of 9.29% over the same period last year; net profit of 283 million yuan, down 0.60% from the same period last year; and net profit of 258 million yuan, down 7.77% from the same period last year.

High-quality operation of solid waste projects and continuous enhancement of business coordination: as of June 2023, the company has a total processing capacity of 59550 tons / day, of which the total operational capacity is 55050 tons / day (including equity participation), compared with 50700 tons / day (including equity participation) at the end of 2022. The new operation capacity is 4350 tons / day (including equity participation). Among them, wholly-owned and holding projects deal with about 6.8127 million tons of domestic waste, an increase of about 12.57% over the same period last year, and the utilization rate of comprehensive capacity remains more than 90%. The average plant-owned electricity consumption rate is 11.7%, which is lower than the 12.4% for the whole of 2022, maintaining the leading level in the industry, and the project operation capacity continues to strengthen. The company pays attention to the coordination of the industrial chain, through the waste incineration power generation project, to achieve the collaborative treatment of multiple kitchen waste and sludge projects, a total of 31200 tons of kitchen waste (+ 122.2%) and 39600 tons of sludge (+ 44.1%). Contribute new growth points to the company's performance.

Deepen overseas layout and add new impetus to energy storage business: in the first half of 2023, Sanfeng Kawanta, a subsidiary, signed 6 contracts for the supply of incinerators and complete sets of equipment, with a total design capacity of 3950 tons per day. Successfully signed Thailand Salabri Phase 5 incinerator equipment supply contract, Vietnam Beijiang waste incineration project design contract to further deepen overseas layout. Sanfeng Technology signed a number of sewage treatment equipment supply contracts, involving a total sewage treatment capacity of 32800 tons per day, and successfully realized the market conversion of the technical achievements of direct drinking water equipment. On June 22, the company jointly funded the establishment of Chenfeng Energy Storage Company with Derun Environment and Xiamen Haichen Energy Storage Company, laying out the industrial and commercial energy storage business on the user side, which is expected to realize the resource complementarity of solid waste disposal and energy storage industry by strengthening the synergy of the industrial chain. create the company's "second growth curve" and add new driving force for the company's business development.

Investment suggestion: the operation of the company's solid waste project is stable, the coordination between projects is obviously enhanced, the cost reduction and efficiency is significantly increased; the layout of overseas markets is continuously deepened, and the project blossoms at many points; entering the field of energy storage, performance growth adds new impetus. Combined with the company's operating situation, we maintain the profit forecast for the company. It is estimated that the company's annual EPS on 23-24-25 will be 0.78 EPS 0.85 yuan per share, corresponding to the closing price PE on August 17, 2023, which will be 9.5pm 8.7pm 8.0 times, respectively. The company will be given 11.0 times PE in 2023 with a target price of 8.58 yuan per share, maintaining a "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.