Main points of investment
Event: Yingfeng Environmental Bulletin 2023 semi-annual report. In the first half of 2023, the company achieved revenue of 6.133 billion yuan, year-on-year (adjusted) + 8.18%; net profit of 373 million yuan, + 14.85%; deduction of non-parent net profit (adjusted) of 328 million yuan, + 13.68%; and basic earnings per share of 0.12 yuan per share, + 20.00% of the same period last year. In this regard, our comments are as follows:
In the first half of 2023, the new annualized contracts and total contracts for urban services ranked first in the industry market, further enhancing the ability of sustainable development. According to the Environment Department Nan, the company signed 42 new sanitation orders in the first half of 2023, with a total new contract value of 5.812 billion yuan and an annualized contract amount of 1.007 billion yuan, ranking first in the same industry market. As of 2023H1, the annual contract value of the company's stock market is 6.283 billion yuan, the total amount of contracts is 59.077 billion yuan, and the total amount of contracts to be executed is 45.41 billion yuan, showing a strong ability of sustainable development. In terms of operation, the company's urban service revenue in the first half of 2023 was 2.594 billion yuan, + 36.38% compared with the same period last year; the gross profit margin was 21.74%, an increase of 3.42pct over the same period last year, and the operation and profitability were restored.
The sales volume of sanitation equipment ranks first in the same industry market, and it continues to have a solid competitive advantage. According to statistics from the China Banking and Insurance Regulatory Commission, the company sold 6008 vehicles of sanitation equipment in the first half of 2023, of which 885 were new energy products, an increase of 46.5 percent over the same period last year, accounting for 36.6 percent of the market share. The company's sanitation equipment sales have been in the first place in the domestic industry for 22 consecutive years, and its competitive advantage has been continuously consolidated. In terms of operation, the company's intelligent equipment revenue in the first half of 2023 was 2.566 billion yuan,-9.22% compared with the same period last year; gross profit margin was 26.84%, an increase of 0.96pct compared with the same period last year.
The net operating cash flow is affected by the reduction of VAT deduction tax rebate, and the sales and management expenses increase as a result of business development. In the first half of 2023, the company's operating net cash flow was 109 million yuan,-43.10% compared with the same period last year, mainly due to the reduction of VAT deduction. In terms of expenses, the company's expense rate during the first half of 2023 was 16.81%, year-on-year + 1.98pct. Among them, the sales fee was 473 million yuan, + 33.46% compared with the same period last year, mainly due to the development of new target markets and the increase in market promotion fees; the management fee was 346 million yuan, + 22.63% compared with the same period last year, mainly due to the expansion of smart service business and the corresponding increase in management costs.
Investment advice: maintain the "overweight" rating. It is predicted that the company will achieve revenue of 13.311 billion / 16.444 billion / 20.116 billion yuan respectively from 2023 to 2025, with a year-on-year value of + 8.6%, 23.5%, 22.3%, 752 million / 854 million / 990 million, and + 79.4%, 13.7%, 15.8%, respectively. The PE valuation corresponding to the closing price on August 25, 2023 is 20.5x/18.1x/15.6x.
Risk tips: sanitation market share decline risk, equipment market competition aggravates the risk, cost rising risk.