3Q23's home net profit is + 49% year-on-year, maintaining profit forecast and target price.
Hanlan Environment released three quarterly reports, 1-3Q23 achieved revenue of 8.96 billion yuan (year-on-year-6.7%), home net profit of 1.166 billion yuan (year-on-year + 35%), deduction of non-net profit of 1.137 billion yuan (year-on-year + 34%), profit growth higher than the performance forecast (+ 30%). Of these, 3Q23 achieved revenue of 3.035 billion yuan (year-on-year-13%, month-on-month-2.9%) and return to its mother net profit of 476 million yuan (year-on-year + 49%, month-on-month + 25%). The profit level of solid waste disposal has increased, reflecting the advantages of operation and management; the profit of energy business has increased greatly compared with the same period last year, and the water supply and drainage business is relatively sound. To maintain the profit forecast, we expect the company's 23-25 return net profit to be 14.72 pound 16.13 / 1.725 billion yuan and EPS 1.80 plus 1.98 pound 2.12 yuan. Comparable company's 23-year Wind unanimously expects the average PE to be 15x, giving the company a 23-year 15xPE with a target price of 27 yuan, maintaining a "buy" rating.
The profit level of solid waste treatment has increased, reflecting the advantages of operation and management.
The company's 3Q23 solid waste disposal business income is 1.51 billion yuan (year-on-year-21%), and the net profit is 315 million yuan (year-on-year + 27%). Sector net interest rate rose sharply, mainly due to low-margin engineering and equipment income-76% year-on-year, net profit-67% year-on-year. Excluding the engineering and equipment business, the 3Q23 revenue of solid waste disposal is + 19% year on year and the net profit is + 47% year on year. The main benefits are as follows: 1) the total waste incineration power generation capacity increased by 3750 tons per day from July 22 to June 23 (equivalent to 14% at the end of June 22); 2) the waste incineration power generation scale of 4500 tons per day was purchased in August 23; 3) the utilization rate of waste incineration power generation capacity increased by 9pct to 120% compared with the same period last year. According to the pace of the company's construction and planning projects, the next batch of new projects will be put into production in 1H24, and we are optimistic that the company's profits from waste incineration and power generation will continue to grow for 23-24 years.
The profit of energy business has increased greatly compared with the same period last year, and the water supply and drainage business is relatively sound.
1) Energy: 3Q23 revenue 1.03 billion yuan (year-on-year), net profit 80 million yuan (year-on-year + 700%), mainly due to the improvement of natural gas price mechanism, gas source structure diversification and non-sales business growth; 3Q company kitchen waste hydrogen production project officially put into production, hydrogen annual production capacity of about 2200 tons; 2) Water supply: 3Q23 income 268 million yuan (year-on-year + 3%), 1-3Q water loss rate decreased 1.04pct to 8.36% year-on-year 3) drainage: the income of 3Q23 is 141 million yuan (- 11% compared with the same period last year), 3Q23 increases sewage treatment capacity by 200,000 square meters per day, and 4Q23/1H24 is expected to increase sewage treatment capacity by 2.5000,000 square meters per day (based on the progress of projects under construction disclosed in the 2023 mid-year report).
The valuation is expected to be repaired and the target price is maintained.
Comparable to the company's 23-year average 15xPE (Wind consensus expectations). The company's current stock price corresponds to only 10xPE for 23 years, and the depressing factors of valuation are expected to be gradually eliminated. The catalysts include: 1) the waste incineration capacity increases again, 2) the profits brought about by the restart of CCER are thickened, and 3) the cash flow situation is improved (by the end of September, the successful transfer of accounts receivable claims of 1 billion yuan, 3Q23 operating net cash flow increased by about 1.3 billion yuan compared with the same period last year). Give the company a 23-year 15xPE with a target price of 27 yuan per share.
Risk hint: the production progress of waste incineration project is lower than expected; the financing trend has been greatly reversed; the rise of natural gas prices has exceeded expectations.