The leading position in sanitation equipment and services is stable, and Yingfeng Environmental released its semi-annual report. In 2023, H1 achieved revenue of 6.133 billion yuan (yoy +8.18%), net profit of 373 million yuan (yoy +14.85%), net profit of 328 million yuan (yoy +13.69%), deducting non-net profit of 328 million yuan (yoy +13.69%). Among them, Q2 achieved revenue of 3.461 billion yuan (yoy +21.62%, qoq +29.58%) and net profit of 217 million yuan (yoy +18.20%, qoq +38.51%). According to the sanitation equipment industry's sales volume and Yingfeng service orders, we lowered our fuel vehicle sales volume and sanitation service revenue forecast. We expect the company's EPS to be 0.23, 0.29, and 0.35 yuan respectively in 2023-2025 (previous values were 0.27, 0.32, and 0.38 yuan in 2023-2025). Comparable companies, Wind, unanimously expected an average PE value of 19.9 times in '23. Considering the company's stable position as a leader in sanitation equipment, the company was given 25.9 times PE in '23, with a target price of 5.96 yuan (previous value of 7.05 yuan), maintaining the “buy” rating.
The sales volume of sanitation equipment declined, and the volume of new energy equipment drove revenue growth. According to China Automobile data, 1H23 China's sanitation vehicles were insured for 410,000 vehicles (yoy -7.8%), of which 2,469 new energy vehicles (yoy +21%), the penetration rate of new energy was 6.1%. Cities with demand for more than 10 new energy units expanded from 27 in the first half of 2022 to 38 in the first half of 2023, an increase of 40.7% over the previous year. The company's H1 sanitation equipment revenue was -9% year-on-year to 2.57 billion yuan, with sales volume of 6008 vehicles (1H22:
7080 units), -15% year on year, but new energy equipment achieved sales volume of 885 units (1H22:599 units), +47% year on year, far exceeding the industry's growth rate, with a market share of 36%, ranking first. The gross margin of sanitation equipment was +1.0pp to 26.8% year-on-year, highlighting the brand's advantages. Benefiting from the trend of new energy conversion of sanitation equipment, the new energy equipment business is expected to continue to drive the company's performance growth.
Revenue from sanitation services has risen sharply, and the number one newly signed project in the industry with a new annualized contract amount has entered operation one after another, driving the company's 1H23 sanitation service revenue +36% year over year to 2.59 billion yuan, and gross margin +3.4 pp to 21.7% year on year. A total of 42 new urban service projects have been signed, covering 13 provinces across the country, adding a total of 5.812 billion yuan in contracts and 1,007 billion yuan in annualized contracts, ranking first in the same industry market. As of June 30, the total amount of contracts pending execution of the company was 45.4 billion yuan, with an annualized amount of 6.28 billion yuan, and its sustainable management capacity ranked among the highest. According to data from the Ministry of the Environment, 1H23, the total amount of new contracts for sanitation services in China was 117.1 billion yuan (+8.3% YoY), the annualized amount of the new contracts was 43 billion yuan (+13.8% YoY), and the average length of service was 2.7 years (1H22:2.9 years). Yingfeng has built a “mechanized operation+intelligent operation+standardized service” operation ecosystem. It continues to lead the industry and is expected to achieve steady growth in performance.
Risk warning: Asset impairment and credit impairment exceeded expectations, sanitation equipment sales fell short of expectations, and the sanitation marketization process fell short of expectations.