3Q23's home net profit is + 20% compared with the same period last year, maintaining profit forecast
Xingrong Environment released three quarterly reports that 1-3Q23 achieved revenue of 5.691 billion yuan (+ 15% year-on-year), net profit of 1.49 billion yuan (+ 8.4% year-on-year) and non-net profit of 1.464 billion yuan (+ 9.6%). Of these, 3Q23 achieved revenue of 2.211 billion yuan (year-on-year + 24%, month-on-month + 17%) and return to its mother net profit of 643 million yuan (year-on-year + 20%, month-on-month + 37%). The increase in capacity scale and capacity utilization is expected to promote the sustained growth of revenue scale. The operating cash flow is good, and the dividend ratio has the potential to improve. To maintain the profit forecast, we estimate that the return net profit for 23-25 will be 1.912 CAGR 2.052 billion yuan, 0.59 CAGR 0.69 yuan and 8% for three years. The company's current stock price corresponds to a 23-year comparable PE average of 11x for 9.0, 8.3, 7.7xPEMe, 23-year. Give the 23-year target PE 11x, the target price 6.49 yuan (the previous value is 5.9 yuan, based on the 23-year 10xPE), and maintain the "overweight" rating.
The increase in capacity scale and capacity utilization is expected to promote the sustained growth of revenue scale. The company's 3Q23 revenue is + 24% year-on-year, thanks to an increase in water supply / sewage treatment / waste incineration power generation business. With the continuous production of the company's water supply / sewage treatment projects under construction, the revenue scale of the business sector still has room to increase; the growth of waste incineration revenue in the short term mainly comes from the improvement of capacity utilization, and the medium-and long-term production of the projects under construction and proposed. The company's 3Q23 gross profit margin was-1.5pct to 45.6% year-on-year, as raw material costs and depreciation rose faster than revenue growth.
The operating cash flow is good, and the dividend payout ratio has the potential to increase.
The net inflow of operating cash from the company's 3Q23 was + 27% year-on-year to 930 million yuan, of which the cash-to-cash ratio was + 4.8pct to 91.3%, and accounts receivable was + 13%. The company's 3Q23 capital expenditure is + 15% to 1.12 billion yuan compared with the same period last year, and capital expenditure is expected to be relatively stable in 23-25. At the end of September, the company's asset-liability ratio was 59%, which has been basically stable since 21 years. The average dividend payout ratio of the company in 20-22 years is 21%. Considering that the company's free cash flow is expected to expand, we believe that the dividend ratio of the company in 23-25 years has the potential to increase, or will fully reflect the potential value of the company.
Risk hint: the risk of electricity price reduction of waste incineration power generation; the project production schedule is not as expected.