Key points of investment
Incident: The company disclosed 23H1 results: revenue increased 16.0% year on year to 4.44 billion yuan; net profit to parent fell 25.2% year on year to 1.82 billion yuan; net profit from main business after deducting joint ventures was 550 million yuan, up 1.2% year on year.
Comment: The waste-to-energy sector is stable and improving. In the first half of the year, revenue from the grate waste power generation business increased 12.3% year on year, of which construction revenue fell 6.8% year on year to 1.7 billion yuan; in the first half of the year, 7 new projects were put into operation & acquisition, contributing 1.29 million tons of annual production capacity increase, and the production capacity of the 7 projects put into operation steadily climbed, driving a 41.9% year-on-year increase in operating revenue to 1.67 billion yuan, accounting for 49%. During the period, the production capacity of grate waste waste power generation increased by 1.56 million tons to 14.37 million tons, with an on-hand production capacity of 5.74 million tons. The amount of garbage entering the factory increased 35.4% year on year to 7.558 million tons, and the amount of feed-in electricity per ton was -14 degrees to 328 degrees over the same period last year.
The scale of project production capacity continues to expand. In the first half of the year, 2 new waste-to-energy projects (annual production capacity of 240,000 tons) were signed, 2 waste-to-energy projects (with an annual production capacity of 580,000 tons) and 2 fly ash disposal projects, and 3 new food waste disposal projects (with an annual production capacity of 50,000 tons) were signed.
Continuing to promote the new energy materials industry chain, new energy materials contributed 29.63 million yuan in revenue in the first half of the year, with a balance of profit and loss.
——Cathode materials: The first phase of the 50,000-ton lithium iron phosphate cathode material was put into operation in September last year. H1 revenue was 29.63 million yuan, with a gross profit margin of 19.2%. The company is continuously improving the supply and marketing system and speeding up product certification work.
——Anode materials: The first phase of the power storage battery anode project is planned to produce 50,000 tons per year. It is at the peak of construction, and is scheduled to be put into operation this year.
——Lithium battery recycling: cost competitiveness is strong, and the layout of key regions is accelerated. The company cooperated with Kawasaki Heavy Industries to jointly develop the CKB lithium battery recycling project, which combines cost, safety and environmental protection advantages, and has the technical advantage of seizing a high place in the development of the industry. Three CKB projects were signed in the first half of the year. The current layout is Jiangsu, Henan, Hebei, Shandong, and Shaanxi. It is expected that 15,000 tons of CKB projects will be put into operation in December this year, with a total production capacity of 135,000 tons at the end of the period.
The plan is to achieve full coverage of 20 target provinces within the first 5 years, and production capacity will reach more than 1 million tons by the end of 2032.
——Extend the field of packaging container recycling. The company plans to build more than 10 production bases in the next 3-5 years, with a total annual disposal capacity of more than 20 million units.
Expense control is good, and the sales expense ratio is basically the same as the management fee rate. Debt was added by 6.65 billion yuan in the first half of the year, bringing in a financial expense ratio of +0.8 ppt. However, due to the optimization of the debt structure, financing costs are estimated to be about -1.0ppt to 2.8%.
The profit and loss attributable to associated companies was -32.8% year-on-year to 1.27 billion yuan.
Operating cash flow for the first half of the year was +8.0% year-on-year to 940 million yuan.
Our opinion: With environmental protection+new energy two-wheel drive as the new engine, the company's long-term plan for new energy materials is 500,000 tons of cathode+200,000 tons of anode plus one million tons of lithium battery recycling. Currently, it is simultaneously rapidly promoting the new energy business market expansion and project construction, speeding up the national layout, improving the channel layout of the positive and negative electrode materials manufacturing industry, and increasing the energy expansion of consumer markets such as power batteries and energy storage batteries. We are optimistic about the cost advantages of the company's CKB leading industry. We expect the company's net profit to be 3,937/41.06/4,074 million yuan respectively in 23/24/25, and net profit attributable to equity shareholders to the main environmental protection business of 998/956/924 million, respectively, +9.0%/-4.2%/-3.3% over the same period, maintaining the “buy” rating.
Risk warning: Project construction has fallen short of expectations; environmental supervision has declined; and Conch Cement's profit has declined sharply.