Event: the company recently released its semi-annual report for 2023. In the first half of 2023, the company achieved a total operating income of 1.54 billion yuan, an increase of 5.12% over the same period last year; a net profit of 351 million yuan, an increase of 4.95% over the same period last year; and a net profit of 345 million yuan, an increase of 8.86% over the same period last year.

Comments:

The performance increased steadily during the reporting period. In the first half of 2023, the company achieved a total operating income of 1.54 billion yuan, an increase of 5.12% over the same period last year; a net profit of 351 million yuan, an increase of 4.95% over the same period last year; and a net profit of 345 million yuan, an increase of 8.86% over the same period last year. The net cash flow generated from business activities was 469 million yuan, an increase of 29.55% over the same period last year. The company's revenue and profitability and other performance is good, maintaining steady growth.

The scale of the main business is expanding. The company is mainly engaged in domestic waste incineration and power generation, as well as kitchen waste and sludge disposal. By the end of the reporting period, the company has invested and built a total of 23300 tons of domestic waste incineration power generation projects, and a total of 3300 tons of kitchen waste projects. During the reporting period, electricity generation was 1.4281098 billion kWh, an increase of 4.28% over the same period last year; online electricity reached 1.2069673 billion kWh, an increase of 5.20% over the same period last year; the storage volume of domestic waste reached 4.2853 million tons, an increase of 12.33% over the same period last year; and the amount of recycled oil extracted from kitchen waste reached 12045.88 tons, an increase of 24.72% over the same period last year. The main business continues to grow, and the gross profit margin of the main business is higher than the same period last year, bringing stable income for the company.

The resource recycling business is promising in the future. The company expands the recycling fields of lithium battery recycling and waste rubber recycling through the acquisition of Lixin new materials and Nantong Huili rubber. During the reporting period, the operating income of lithium battery recycling business was 81.8284 million yuan, accounting for 5.31% of the total operating income during the reporting period. Nantong Huili Phase I butyl recycled rubber production line has been officially put into operation, and the second phase of the production line containing butyl recycled rubber, tire recycled rubber and vulcanized rubber powder is under construction; during the reporting period, the operating income of waste rubber recycling business was 39.1096 million yuan, accounting for 2.54% of the total business income during the reporting period. At present, the overall share of the company's resource recycling business is relatively low, but there is still a lot of room for growth.

Maintain the "overweight" rating. On the one hand, the company's main business is growing steadily, on the other hand, it is expanding its resource recycling business, and it can grow in the future. It is estimated that the company's earnings per share in 2023 / 2024 are 1.97 yuan per share, respectively, and the current share price is 6.98 times corresponding to PE, maintaining the company's "overweight" rating.

Risk tips: increased competition in the industry, rising prices of raw materials, policy promotion is not as expected, the release of market projects is not as expected, project construction is not as expected, technology upgrading to replace the risk, and so on.