Core views
In 2023, the company achieved revenue of HK$4.980 billion, a year-on-year decrease of 39.60%, mainly due to a decrease in incineration power generation projects under construction by the company, and a 76.7% year-on-year decrease in project construction business revenue.
The decline in the share of engineering business with low gross margin drove the company's overall gross margin from 30.7% to 41.8%, an increase of 11.1 percentage points over the previous year, which can better reflect the profitability of the company's operating business. By business, in 2023, the company's electricity sales, garbage disposal, project construction and environmental hygiene business achieved operating income of HK$24.17, 10.13, 10.18 and HK$342 million respectively. By the end of 2023, the company had 33 waste treatment projects in transit, with a daily urban domestic waste treatment capacity of 4,3690 tons. With the gradual commissioning of the company's waste incineration project, the share of operational business has further increased, and the company's profitability is expected to continue to increase. We expect the company's net profit to be 1,281 billion, 1,479 million and HK$1,617 billion respectively from 2024 to 2026, maintaining a “buy” rating.
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Yuefeng Environmental Protection Announces 2023 Annual Results
In 2023, the company achieved revenue of HK$4.980 billion, a year-on-year decrease of 39.60%; realized net profit due to mother of HK$1.01 billion, a year-on-year decrease of 24.9%; achieved basic profit of HK$0.41 per share, with a total dividend of HK$0.08 per share.
Brief review
Project revenue dragged down overall revenue, and overall gross margin improved markedly
In 2023, the company achieved revenue of HK$4.980 billion, a year-on-year decrease of 39.60%, mainly due to a decrease in incineration power generation projects under construction by the company. Project construction business revenue decreased by 3.343 billion yuan over the same period last year, a decrease of 76.7%. The company's net profit in 2023 was HK$1.01 billion, and the performance fell 24.9% year on year. This was mainly due to a sharp increase in overseas interest rates, which led to a 10% year-on-year increase in the company's interest expenses to reach 676 million yuan, compounded by the impact of the RMB exchange rate falling by about 7% during the year. The decline in the share of engineering business with low gross margin drove the company's overall gross margin from 30.7% to 41.8%, an increase of 11.1 percentage points over the previous year, which can better reflect the profitability of the company's operating business. By business, in 2023, the company's electricity sales, garbage disposal, project construction and environmental sanitation business achieved operating income of HK$24.17, 10.13, 10.18 and HK$342 million respectively, accounting for 48.6%, 20.3%, 20.4% and 6.9% of revenue respectively. In 2023, the company's gross margin levels for electricity sales and garbage disposal, project construction and environmental health and other services were 46.6%, 15.3% and 39.6%, respectively, up 0.3, 0.1 and 5.3 percentage points over the previous year. Thanks to the successive commissioning of the company's waste incineration projects, the net cash flow from the company's operating activities was converted to HK$1,079 billion for the first time, and the balance ratio decreased by 0.8 percentage points to 64.3%.
At the end of 2023, the company plans to distribute a dividend of HK$0.032 per share, for a total of HK$0.082 per share after the mid-year dividend.
Waste treatment capacity has grown steadily, and sanitation projects have achieved breakthroughs
By the end of 2023, the company had 36 signed waste incineration power generation projects, with a total daily urban domestic waste treatment capacity of 5,4540 tons. Of these, 33 projects have been put into operation, with a daily urban domestic waste treatment capacity of 4,3690 tons, and the scale of operation is at the forefront of the industry. In 2023, the company treated 166.157 million tons of garbage harmlessly, up 18.7% year on year; used green energy to generate 6.218 billion kilowatt-hours, up 18.4% year on year; total electricity sales volume was about 5.349 billion kilowatt-hours, up 18% year on year. Based on the waste incineration power generation business, the company actively promoted the development of the sanitation market. During the year, it won the bid for an urban and rural sanitation and domestic waste compression transfer and treatment project in Quyang County, Hebei Province, and won the Hong Kong Waste Transfer Station contract for the first time.
Carbon asset development progresses steadily, maintaining a “buy” rating
In August 2023, the company's Yingkou waste incineration power generation project obtained registration approval to certify carbon emission reduction standards. It is expected to reduce carbon dioxide emissions by 245,000 tons per year, taking an important step in carbon asset development. With the gradual commissioning of the company's waste incineration project, the share of operational business has further increased, and the company's profitability is expected to continue to increase. We expect the company's net profit to be 1,281 billion, 1,479 million and HK$1,617 billion respectively from 2024 to 2026, maintaining a “buy” rating.