Core viewpoints

In the first three quarters of 2023, the Company realized operating income of CNY 4.808 billion, with a year-on-year growth of 13.59%; net profit attributable to parent company was CNY 878 million, with a year-on-year growth of 5.64%. In the third quarter alone, the company realized operating income of RMB 1.572 billion yuan, with a year-on-year growth of 6.32%; net profit attributable to parent company was RMB 284 million yuan, with a year-on-year growth of 13.93%. In the near future, the Company intends to issue convertible bonds for waste incineration power generation projects, hazardous waste comprehensive disposal projects and sewage treatment projects. We expect that the cash flow situation of the Company is expected to improve, and the revenue scale of environmental protection projects is expected to continue to grow. The total mileage of Xupingnan Expressway, the core road and bridge assets of the Company, is 255km, accounting for 3.85% of the total mileage of expressways in the whole province. Its maintenance experience, road maintenance and toll service have reached the forefront of the industry, which is expected to bring continuous and stable cash flow to the Company. At present, the revenue of the Company's sanitation business is in a growth trend, and the high-speed business is developing steadily, which can provide financial support for the investment and construction of new projects. We expect that the performance scale of the Company is expected to improve steadily.

Event

The company releases the third quarter report of 2023

In the first three quarters of 2023, the Company realized operating income of CNY 4.808 billion, with a year-on-year growth of 13.59%; net profit attributable to parent was CNY 878 million, with a year-on-year growth of 5.64%; net profit deducted from non-parent was CNY 869 million, with a year-on-year growth of 8.67%; basic earnings per share was CNY 1.37/share, with a year-on-year growth of 5.64%; and weighted average return on net assets was 12.68%.

Brief comment

Steady growth in revenue scale, year-on-year increase in net profit attributable to mother

In the first three quarters of 2023, the Company realized operating income of CNY 4.808 billion, with a year-on-year growth of 13.59%; net profit attributable to parent company was CNY 878 million, with a year-on-year growth of 5.64%. In the third quarter alone, the company realized operating income of RMB 1.572 billion yuan, with a year-on-year growth of 6.32%; net profit attributable to parent company was RMB 284 million yuan, with a year-on-year growth of 13.93%. In terms of period expense rate, in the first three quarters of 2023, the company's sales rate, management rate, R & D rate and financial rate were 0.35%, 5.76%, 1.56% and 8.65% respectively, with year-on-year changes of-0.05,+0.28,+0.61 and +0.05% respectively. Among them. The year-on-year increase in R & D expense ratio was mainly due to the increase in R & D projects and R & D investment of the Company. In terms of cash flow, in the first three quarters of 2023, the net cash flow from operating activities of the Company was RMB997 million, representing a year-on-year increase of 19.17%, mainly due to the increase in cash received from sales of goods and provision of services in the current period; the net cash flow from investment activities was RMB-1.928 billion, representing an increase of 25.27% compared with the same period last year, mainly due to the year-on-year decrease in cash received from investment recovery of the Company; and the net cash flow from financing activities was RMB1.928 billion. 9.95 RMB billion, an increase of 86.53% year-on-year, mainly due to the increase in financing lease payments of the Company.

Environmental protection business multi-pronged, project scale is expected to grow

The Company's environmental protection business can be divided into solid waste treatment, environmental protection solution integration business and water treatment business, of which solid waste treatment is the core business. Since 2019, the Company has seized the policy opportunity of venous industrial park in Henan Province and rapidly expanded the scale and capacity of waste incineration projects in three years. Since 2023, the incineration power generation projects in Huaiyang, Xi County, Kashgar, Neihuang and other places of the Company have been put into operation successively, and the scale of waste incineration business continues to expand. At the same time, through the acquisition of Beijing Xinyi, the Company further cultivated the competitive advantage of solid waste treatment business, enhanced the comprehensive environmental treatment service capability, and realized the coordinated development of waste incineration and recycling dismantling business. In the near future, the Company intends to issue convertible bonds for waste incineration power generation projects, hazardous waste comprehensive disposal projects and sewage treatment projects. We expect that the cash flow situation of the Company is expected to improve, and the revenue scale of environmental protection projects is expected to continue to grow.

Holding high-quality high-speed assets, maintaining a "buy" rating

The company's high-speed business mainly includes tolls and service area operations and advertising. As an important transportation hub in China, Henan Province has a total mileage of 255km of Xupingnan Expressway, the core road and bridge assets of the Company, accounting for 3.85% of the total mileage of expressways in the whole province. Its maintenance experience, road maintenance and toll service have reached the forefront of the industry, which is expected to bring continuous and steady cash flow to the Company. At present, the revenue of the Company's sanitation business is in a growth trend, and the high-speed business is developing steadily, which can provide financial support for the investment and construction of new projects. We expect that the performance scale of the Company is expected to improve steadily. We estimate that the operating income of the Company from 2023 to 2025 will be RMB 6.645 billion, RMB 7.117 billion and RMB 7.082 billion respectively, and the corresponding net profit attributable to the parent company will be RMB 1.224 billion, RMB 1.415 billion and RMB 1.473 billion respectively, and the corresponding EPS will be RMB 1.91, RMB 2.20 and RMB 2.29 respectively, maintaining the "Buy" rating.