Items:
On August 25, 2023, the company disclosed its half-yearly report for 2023. During the reporting period, the company achieved main income of 8.838 billion yuan, down 10.97% from the same period last year; net profit from home was 757 million yuan, down 11.63% from the same period last year; of which single Q2 company achieved main income of 4.495 billion yuan, down 13.62% from the same period last year; net profit from home was 433 million yuan, down 20.25% from the same period last year.
Comments:
Business adjustment led to a decline in performance compared with the same period last year. Since June 10, 2022, the company began to adjust the toll policy of Jingtong Expressway and dispose of New Zealand projects and Yiyang projects in 2022, resulting in a year-on-year decline in revenue and profits. In the first half of 2023, the company achieved operating income of 8.838 billion yuan, down 10.97% from the same period last year; net profit belonging to shareholders of listed companies was 757 million yuan, down 11.63% from the same period last year; and net operating cash flow was 1.097 billion yuan, down 19.50% from the same period last year.
Improve the quality of business, environmental protection operation business continues to develop. In terms of urban water operations, the main business income of the water supply water treatment business was 1.483 billion yuan, an increase of 7.2% over the same period last year, and the main business income of the water supply service business was 520 million yuan. The utilization rate of water supply capacity was 62.75%, an increase of 2.75pct over the same period last year, and a difference of 13.49% between production and sales, a decrease of 1.35pct over the same period last year. In the first half of 2023, the volume of water sold was 684 million tons, up 5.06 percent from the same period last year, and the comprehensive water price was 1.91 yuan per ton (including tax), down 5.91 percent from the same period last year. Two transshipment projects were completed in the first half of the year, involving a processing scale of 5.99 million tons per day. The main business income of the sewage and water treatment business was 2.907 billion yuan, an increase of 9.96% over the same period last year. The settled water volume of the sewage treatment business in the first half of the year was 1.461 billion tons, an increase of 1.87% over the same period last year. The comprehensive water price was 1.61 yuan per ton (including tax), down 3.01% from the same period last year. The utilization rate of sewage business capacity was 80.84%, an increase of 0.84pct over the same period last year. In the first half of the year, six transshipment projects were completed, involving a processing scale of 3562 million tons per day. Solid waste incineration business, in terms of operational efficiency improvement:
A total of 16 waste disposal agreements were signed in the first half of the year, realizing more than 60,000 tons of garbage entering the plant outside the franchise; in terms of the maintenance of the concession agreement: promoting trial operation, among which Tanghe incineration entered commercial operation during the reporting period. Zhumadian incineration, Jishou incineration and Nanle incineration are being carried out as planned.
Expand the number of business, expand the scale of the contract. In the first half of 2023, the company added 6.94 billion yuan of contracts, of which 5.54 billion yuan was added for light assets business, accounting for 79.83% of the total new contracts. The new contract value of the urban water business plate is 2.96 billion yuan, accounting for 42.65% of the total new contract value of the company; the new contract value of the solid waste business plate is 3.44 billion yuan; and the contract value of the atmospheric industry business plate is 60 million yuan, of which the new contract value of industrial business is 2 million yuan. In stock with increments. As of June 2023, the company has set up a total of 26 "city companies", including 19 urban water businesses and 7 solid waste businesses.
Investment suggestion: taking into account the impact of the sale of New Zealand subsidiaries and the adjustment of Jingtong Expressway toll policy, we lowered the 2023-2024 profit forecast while adding the 2025 profit forecast: the 2023-2024 company's net profit is expected to be 1.706 billion yuan / 1.852 billion yuan (the original value is 2.629 billion yuan / 3.057 billion yuan), and 2.058 billion yuan in 2025. Using the comparable company valuation method, select the representative water and solid waste enterprises (Shanghai Environment, China Tianfu, Hanlan Environment and Chongqing Water) for comparison, and because the company is a national enterprise, and the industry leader, with many high-quality reserve projects, should enjoy a certain valuation premium, giving the company 15 times PE in 2023, corresponding to the target price of 3.45 yuan, maintaining a "strong push" rating.
Risk hints: increased competition and a sharp decline in subsidies in the solid waste sector due to policy; decline in profits in the sewage and water supply sector caused by policy and other factors; and the project production schedule is not as expected.