This report is read as follows:

The decline in construction revenue affects performance, and operating performance is growing steadily.

Main points of investment:

Maintain the "overweight" rating. The forecast net profit of the company from 2023 to 2025 is 8.40,9.31 and 1.037 billion yuan, corresponding to EPS is 0.60,0.67,0.74 yuan, and the target price is 11.81yuan.

The operating income is growing steadily and the performance is in line with expectations. 1) 2023H1 achieved revenue of 2.142 billion yuan, down 5% from the same period last year; net profit attributable to 364 million yuan, down 13% from the same period last year; deducting 359 million yuan from non-attributable net profit, down 13% from the same period last year; 2) the decline in performance was mainly affected by the decline in construction revenue and other factors. The scale of 2023H1 projects under construction decreased by 642 million yuan, down 28% from the same period last year. 3) operating income increased 11% year-on-year to 1.302 billion yuan, mainly due to the addition of Huizhou three-in-one, Enshi, Shuozhou, Huludao garbage power generation and other operating projects, as well as the impact of Fengcheng Company's inclusion in the consolidated statement. 4) interest income increased by 3% to 198 million yuan compared with the same period last year, mainly due to the increase in contract assets recognized as a percentage of completion with the construction of Jingxi and Zhangqiu Phase II projects.

The amount of garbage disposal and the amount of electricity connected to the Internet have reached record highs, and the project on hand has made steady progress. 1) 2023H1 handled a total of 6.3 million tons of domestic waste, an increase of 15% over the same period last year, and the amount of electricity connected to the Internet was 1.84 billion kWh, an increase of 9%. 2) steady progress of the in-hand project: the Shuozhou project was completed and put into production in March; the Huludao garbage power generation project was completed and put into production in May; Wuhan Phase II was officially put into production in June; and 97% of the total project volume of the Jingxi project was completed in the first half of the year. Zhangqiu Phase II project was put into production at the end of August. 3) by the end of 2023H1, the waste disposal capacity of the operating project has reached 38,000 tons per day, which is in the forefront of the industry.

A breakthrough has been made in the development of new business. 1) the company signed the "Equity acquisition Framework Agreement" in February, Gansu Lanzhou and other projects made breakthroughs, and basically completed the on-site survey in the first half of the year. 2) in terms of new business development, the company signed a framework agreement with the people's Government of Zhangqiu District of Jinan in May, and then carried out the preliminary work.

Risk tips: project schedule is lower than expected, industry policy changes, etc.