This report is read as follows:

2023Q3's waste incineration business is sound, and the lithium battery recycling business is lower than expected. The board of directors proposed a profit distribution plan of 2 yuan (including tax) for every 10 shares in the first three quarters of 2023, with a positive dividend.

Main points of investment:

Maintain the "overweight" rating. According to the financial report, the company's solid waste business remained sound, but lithium recycling was lower than expected. We lowered our forecast net profit for 2023-2025 to 7.75 billion yuan, 8.84 billion yuan and 994 million yuan, corresponding to 1.80,2.06,2.31 yuan for EPS. Select Hanlan Environment, Green Power and Junxin shares as comparable companies, comparable company 2023 PE average 11 times, Wang Neng environmental solid waste business steady operation, fine management level is high, after the peak of capital expenditure is expected to usher in a dividend rate increase period, give the company 2023 11 times PE, lower the target price to 19.80 yuan.

Overall performance is basically in line with expectations. 1) 2023Q3 achieved revenue of 2.4 billion yuan, up 3% from the same period last year; net profit attributable to 517 million yuan, down 4% from the same period last year; deducting non-attributable net profit from 508 million yuan, up 1% from the same period last year; 2023Q3 deducting non-attributable net profit from 163 million yuan in a single quarter, down 13% from the same period last year and 11% from the previous year. 2) the decline in profit was mainly due to the loss of 31 million in the first three quarters of 2023 (+ 15 million in the same period last year). Profits from the traditional main waste incineration industry are still growing steadily.

The waste incineration business is sound, and the lithium battery recycling business is lower than expected. 1) 2023Q3's domestic waste disposal income is 1.726 billion yuan, an increase of 7% over the same period last year, and its operation is sound. 2) the recovery income of lithium battery was 110 million yuan, down 31% from the same period last year, mainly due to the rising price of raw materials, fierce market competition and other reasons.

Cash flow improvement, active dividend. 1) the net cash flow of 2023Q3's operating activities was 819 million yuan, an increase of 27% over the same period last year. 2) in order to better return to shareholders, the board of directors proposed a profit distribution plan of 2 yuan (including tax) for every 10 shares in the first three quarters of 2023, with a total cash distribution of 85.9 million yuan, accounting for 17% of 2023Q3's home net profit. With the gradual commissioning of the project in hand, the company has passed the peak of capital expenditure, and the future dividend rate increase and high dividend yield can be expected.

Risk tips: project schedule is lower than expected, industry policy changes, commodity prices fluctuate sharply, and so on.