Comprehensive environmental service provider. The company focuses on the environmental service industry, and the “integrated two wings” business pattern of “solid waste treatment as the core of expansion and collaborative development of water and energy” is getting better and better.
The company operates steadily, and the Hanlan model is improving day by day. The company operates steadily, operating income is growing steadily, and profitability is outstanding. In the field of solid waste treatment, the company has formed a vertical full-chain development model integrating front-end sanitation, mid-end transit and back-end treatment, and has the ability to benchmark the construction of a “waste-free city” and provide comprehensive services for the entire solid waste treatment industry chain.
Solid waste business: a core driver. The solid waste business is the company's core driving force. The solid waste business layout is getting better, production capacity expansion is progressing in an orderly manner, and profitability is outstanding. The biggest highlight recently is that the profit contribution of the operational solid waste business continues to increase, achieving high-quality and sustainable development.
The energy business: a critical turning point. Affected by soaring gas source procurement costs, the company's energy business sector was not profitable in 2021-2022. With the implementation of the fair price policy and the stabilization of energy prices, the performance of the company's energy business is expected to reverse and achieve positive returns.
Water business: stable cash flow. The company's water business is developing steadily, and production capacity and revenue have increased steadily. At the same time, cost reduction and efficiency have been achieved through increased capacity utilization and informatization development, providing stable cash flow support for the company's overall development.
Profit forecasting and valuation analysis. We expect the company's net profit from 2023-2025 to be 13.8/15.8/1.75 billion yuan, respectively, up 20.7%/14.6%/10.6% year on year. The company's dynamic price-earnings ratio for 2023-2025 is 10 times, 9 times, and 8 times, respectively. Compared with companies of the same type, the valuation of a company's price-earnings ratio is more attractive. From the perspective of PB-ROE, the company's net market ratio in 2022 is 1.29 and ROE is 10.53, which also has a comparative advantage. From a dividend ratio perspective, the company is at the median value level in the industry. As the company continues to increase the profit contribution of operating businesses and continuously strengthens the repayment and management of accounts receivable, we expect the company's dividend capacity and dividend ratio level to improve.
Investment advice. The “Han Blue Model” is improving day by day. Under the integrated environmental service system of the entire industry chain, the company's business development is more balanced and steady. The vertical collaboration of different links in the entire industry chain and the horizontal collaboration capabilities between different segments continues to improve. At the same time, as energy prices gradually stabilize, the company's energy business has entered a turning point and is expected to contribute positive profits. From a valuation perspective, the profit contribution of the company's operating assets has increased, dividend capacity has increased, and there is plenty of room for improvement in future dividend ratios.
The company is stable and far-reaching, and its valuation is in the bottom range of history, maintaining a “buy” investment rating.
Risk warning: The production capacity of solid waste businesses such as waste incineration and power generation is lower than expected; the capacity utilization rate of the solid waste business is lower than expected; the smooth implementation of natural gas prices falls short of expectations, etc.