Introduction to this report:
The company calculated a goodwill impairment of 361 million yuan, mainly hazardous waste projects acquired during the Sunshine City period. After deducting the impact of goodwill, the performance was in line with expectations. The company's new energy business is progressing in an orderly manner, environmental orders are sufficient, and operating cash flow has improved dramatically.
Key points of investment:
Maintain an “Overweight” rating. According to the company's financial reports and operating conditions, we lowered the company's projected net profit for 2024-2025 and 2026 to 14.14 (-21%), 17.05 (-27%), and 2.07 billion yuan, respectively. The corresponding EPS was 1.31, 1.58, and 1.95 yuan, respectively, and lowered the company's target price to 18.41 yuan.
The impairment of goodwill affects the company's performance once, and the performance is in line with expectations after deducting the impairment of goodwill. In 2023, the company achieved revenue of 10.973 billion yuan, a year-on-year decrease of 8%; attributable net profit of 509 million yuan, a year-on-year decrease of 37%; and net profit without deduction of 347 million yuan, a year-on-year decrease of 47%. The decline in performance was mainly due to:
The total amount of goodwill impairment preparations calculated in this period is 361 million yuan. We believe that goodwill is mainly a remnant of hazardous waste projects acquired during the Sunshine City period; the new energy business is all under construction, and the cost of the construction period is about 80 million yuan; and the company's historical projects make one-time non-operating compensation payments and foreign donations of about 36 million yuan.
After the goodwill was calculated, the burden of history was completely freed, the new energy business progressed in an orderly manner, and there were sufficient environmental protection orders in hand. 1) In terms of scenery, the company relies on the Zijin Mine's clean energy business to fully develop, and the construction of the nearly 1GW wind and green power project is progressing smoothly. At the same time, keeping up with Zijin's overseas and domestic resources, a number of projects are undergoing preliminary work. 2) In terms of energy storage, Longjing Honeycomb Phase I 2 GWh PACK production line was put into operation in August 2023; the Shanghang 5GWh lithium iron phosphate energy storage battery project was successfully put into operation in January 2024; the company has an energy storage contract of 1.56 billion yuan in 2023. 3) In terms of the main environmental protection business, in 2023, the company added 10.287 billion yuan in environmental protection engineering contracts, an increase of 5% over the previous year. At the end of the period, there were 18.510 billion environmental protection project contracts in hand, which strongly supported the growth in performance.
Operating cash flow has improved significantly. The company's cash flow management level is outstanding. After increasing repayment efforts, the company's net cash flow from operating activities in 2023 was 1.706 billion yuan, an increase of 104% over the previous year.
Risk warning: Flue gas equipment sales, solid hazardous waste project management, new energy business development falling short of expectations, etc.