The net profit of homecoming in the first three quarters was-9% compared with the same period last year.

Green Power released three quarterly reports that in 2023, Q1-Q3 realized revenue of 3.042 billion yuan (yoy-9.67%), net profit of 536 million yuan (yoy-9.27%) and non-net profit of 527 million yuan (yoy-9.94%). Among them, Q3 realized revenue of 901 million yuan (yoy-18.50%,qoq-18.20%) and net profit of 172 million yuan (yoy-1.29%,qoq-11.18%), which was 11% lower than the lower limit of Huatai forecast (Huatai forecast: 1.93-213 million yuan). By lowering the forecast of the construction income of the BOT project and the gross profit margin of solid waste disposal, we estimate that the return net profit in 23-25 years will be RMB 741 million (the previous value: RMB 847 million).

For Green Dynamics H shares (1330 HK), we give 7.8x 2023 forecast PE, corresponding to a target price of HK $4.40 (previous value: HK $4.79), reiterating the "buy" rating. For Green Power A shares (601330 CH), we give 15.5 times the 2023 forecast PE, corresponding to the target price of RMB8.22 (previous value: RMB8.87), reiterating the "buy" rating.

Construction investment declined, net operating cash flow + 51% compared with the same period last year

The company's revenue declined in the third quarter compared with the previous quarter, which we think may be due to the decline in construction revenue from BOT projects due to the decline in the scale of projects under construction. Due to the decrease in construction investment in the first three quarters compared with the same period last year, the construction expenditure of PPP projects taking into account the cash outflow from operating activities decreased, and the net operating cash flow was + 51% to 660 million yuan compared with the same period last year.

As of September 30, accounts receivable were-2% to 1.9 billion yuan year-on-year, which remained basically stable.

Changes in business structure increase gross profit margin

In the first three quarters, the green power gross profit margin was yoy+4.0pp to 38.2%, which we believe is due to the increase in the proportion of solid waste disposal business with higher gross profit margin. Under the background of the decline in revenue from the same period last year, the overall cost increased during the period, with the expense rate of yoy+2.2pp to 16.4%, of which the sales / management / R & D / financial expense rate was 0.03cm 4.7 shock 0.13 shock 11.5%, respectively, the year-on-year change + 0.01/+0.9/-0.03/+1.3pp, the management / financial expense rate increased year-on-year, and the net interest rate yoy+3.8pp to 18.5%.

Garbage disposal capacity and online electricity consumption continue to grow, and the number of projects under construction decreases. According to the company's announcement on September 20, five projects are under construction in the first half of the year, three of which were put into production in the first half of the year, and the Zhangqiu Phase II project was put into production at the end of August. The project currently under construction is the Jingxi Project in Guangxi. As of June 30, the company's waste incineration power generation project operating capacity of 38,000 tons / day, by the end of August, the company's waste incineration power generation operating capacity has reached 39500 tons / day. In the first three quarters, the company's waste into the factory and online electricity increased by 18% and 11% compared with the same period last year, while actively expanding the business of kitchen waste and heating, which is expected to further promote income diversification and promote high-quality growth.

Risk hints: the amount of garbage disposal and online electricity are lower than expected, the gross profit margin of solid waste disposal is lower than expected, and the decline in construction revenue is more than expected.