Event description

Weiming Environmental Protection 2023Q1-3 achieved an operating income of 4.62 billion yuan, an increase of 38.93% over the same period last year, and a net profit of 1.57 billion yuan, an increase of 25.08% over the same period last year. Of this total, Q3 achieved an operating income of 1.73 billion yuan in a single quarter, an increase of 62.15% over the same period last year, and a net profit of 545 million yuan, an increase of 56.52% over the same period last year.

Event comment

The operating income increased steadily, and the contribution of engineering equipment increased mainly. Revenue composition: 1) the revenue of environmental protection and new materials and equipment in the first three quarters was 2.339 billion yuan, an increase of 66.5% over the same period last year, accounting for about 50.6%, which was the main increment, of which the revenue in the third quarter was 915 million yuan, an increase of 121.2% over the same period last year. The main reason: 2022Q3 business due to the reduction of waste incineration operation projects EPC declined significantly, the base is relatively low The peak period of waste incineration has passed, and new materials and equipment begin to contribute revenue, bringing new impetus to the growth of the company. New equipment orders for 2023Q1~Q3 totaled 2.71 billion yuan. 2) the operation of the project grew steadily, with an income of 2.262 billion yuan, an increase of 20.3% over the same period last year. In 2022, 2023Q1-3 Company respectively put into operation the waste incineration project of 78501,800 tons per day, bringing about a steady increase in waste disposal capacity. The total garbage storage volume of the holding waste disposal project 2023Q1-3 was 8.7037 million tons, an increase of 27.39 percent over the same period last year, and the amount of electricity connected to the Internet was 2.322 billion kilowatt-hours, an increase of 20.48 percent.

Gross profit margin has declined and accounts receivable have increased. The 2023Q1~Q3 gross profit margin has been reduced by 2.73pct to 47.1%, which is speculated to be due to: 1) the increase in the proportion of equipment business with low gross profit margin; 2) for the new projects put into operation after 2022, the company, in accordance with the principle of prudence, did not recognize the subsidized part of the income for the projects that were not landed in the bidding results, which is the impact of accounting recognition. In the first three quarters of 2023, the company's expense rate was reduced by 2.21pct to 8.74%, of which the financial expense rate was reduced by 1.53pct to 3.56%, and the management expense rate was reduced by 0.28pct to 3.43%. In the first three quarters, the net cash flow of the company's operating activities was 1.382 billion yuan, an increase of 8.0% over the same period last year, and the cash-to-cash ratio / net current ratio was 65.5% / 86.5% respectively, down 17.6pct and 15.8pct over the same period last year, mainly due to electricity subsidies for new garbage power generation projects. in addition, new energy equipment was sold, but the cash flow lagged behind.

New energy opens the growth ceiling. 1) abroad: the company lays out 130000 tons of oxygen-rich side-blown high matte smelting project in Indonesia, of which the main factory building of the 40,000-ton Indonesian high matte project of Jiaman Company has reached the top, and the third quarter has entered the stage of equipment installation, and the construction progress of the project has been accelerated. In July 2023, he participated in the project of smelting Indonesian laterite nickel ore to produce nickel raw materials for new energy (20,000 tons of nickel per year, with a stake of 20%). 2) domestic: actively layout the production capacity of integrated lithium materials, and introduce cooperation companies in Wenzhou base to build a new energy industrial park with capacity of lithium salts, lithium materials, electrolytes and recycling. The company and Yongqing Science and Technology, Xinwangda, Shengtun Mining layout 200000 tons Sanyuan positive integration project. The company, Yongqing Technology and Greenmei signed framework agreements with Wenzhou High-tech Zone and Wenzhou Dongtou District respectively, laying out 100000 tons of power battery and battery waste recycling capacity and 100000 scrapped vehicles recycling capacity. Invest in the construction of a base with an annual output of 600000 tons of nickel-cobalt-manganese sulfate crystal materials, 50,000 tons of ultra-high nickel ternary precursor materials, and an annual output of 45000 tons of high-purity lithium carbonate, together with New Zebang, Yongqing Science and Technology, and Greenmei to build three major bases with an annual output of 100000 tons of electrolyte materials, attracting graphene anode materials and diaphragm materials industry chain projects.

Up to the consolidated report of 2023H1 Company, the garbage incineration project is operating 295 million tons / day, and the scale of the project under construction + preparation is 17,000t / day. As waste incineration projects are gradually put into operation in the future, the company's performance will still improve gradually, and the new energy business will begin to contribute profits in 2023. It is estimated that the company's net profit from 2023 to 2024 will be 2.06 billion yuan and 2.7 billion yuan respectively, and the corresponding PE will be 15x and 11x respectively, maintaining a "buy" rating.

Risk hint

1, the project schedule is lower than the expected risk; 2, the profitability of the high matte project is low the expected risk.