Core views:
The results for the third quarter of the year increased 57% year on year, waiting for the company's growth engine to change. The company released its 2023 three-quarter report. In the first three quarters, it achieved operating income of 4.621 billion yuan (+38.93%), net profit to mother of 1,571 billion yuan (+25.08% year over year); revenue of 1,728 billion yuan (+62.15% year over year) and net profit to mother of 545 million yuan (+56.52% year over year) in the first three quarters. The share of operating profit has increased, orders for new materials and equipment have made up for the decline in orders for environmental protection equipment, and the volume of new energy businesses such as superimposed high ice nickel and cathode materials is imminent, and the growth engine is expected to change.
Solid waste business: A large proportion of ongoing projects are transferred, reflecting the hematopoietic advantages of waste incineration. The first three quarters achieved environmental operating revenue of 2.62 billion yuan (+20% YoY) and 8.7 million tons of garbage stored (+27% YoY). By the end of the third quarter of 2023, the company had a waste incineration production capacity of 33,700 tons/day, and the construction capacity was only 3,000 tons/day. After a large proportion of the projects were put into operation, the main traditional solid waste business became a stable cash cow, providing sufficient financial security for the development of the company's new energy business. In the first three quarters of 2023, the company achieved a net operating cash flow of 1,382 billion yuan (+7.85% year over year).
The new energy and new materials business layout is being accelerated to create an integrated advantage in the ternary industrial chain. In the field of new energy, the company's 40,000 tons/year Indonesian high-ice nickel project has already entered the equipment installation stage and is about to be put into operation.
Furthermore, during the reporting period, the government plans to invest 700 million yuan to build a 50,000 ton high-purity electrolytic nickel project and participate in the 20,000 tons/year nickel raw material project for Indonesian laterite nickel ore. The Wenzhou lithium battery project is also being accelerated.
According to the 2023 semi-annual report, in the equipment sector, the company signed a new supply contract of 538 million yuan for laterite nickel equipment and 950 million yuan for Yongxu Mining, and orders for new materials and equipment have entered the release period.
Profit forecasting and investment advice: high-efficiency solid waste leading transformation to new energy. We expect the company's net profit to be 20.04/25.27/3,052 billion yuan in 2023-2025, and the PE corresponding to the latest closing price is 15.15/12.02/9.95 times, respectively. The company's waste incineration profitability is outstanding, the integrated layout of the high-ice nickel-cathode materials industry chain is ongoing, and the environmental protection+new energy transformation is underway. For reference, comparable companies gave 20 times PE in 2023, with a reasonable value of 23.51 yuan/share, maintaining a “buy” rating.
Risk warning. Risk of obtaining new orders; risk of issuing subsidies; low expectations for the commissioning of new energy projects.