Introduction to this report:
The company's hazardous waste recycling sector is expected to bottom out in 2023, and it is expected that 2024 will improve significantly along with improved operations and a recovery in commodity prices.
Key points of investment:
Maintain an “Overweight” rating. We maintain our forecast that the company's net profit for 2023-2025 will be 925, 11.51 billion yuan, and 1,352 million yuan, respectively, and the corresponding EPS will be 0.60, 0.75, and 0.88 yuan, respectively. Maintain the target price of $11.25 and maintain the “Overweight” rating.
The company's hazardous waste recycling sector is expected to bottom out in 2023, and it is expected that 2024 will improve significantly along with improved operations and a recovery in commodity prices. 1) Jiangxi Xinke has gradually completed commissioning and technical reforms, and is expected to contribute an important increase in performance in 2024. In 2023, Xinke has produced more than 30,000 tons of cathode copper, about 1 ton of gold ingots, about 20 tons of silver ingots, about 1,200 tons of crude nickel sulfate, and a small amount of platinum powder and palladium powder. At present, the technical transformation of the Xinke project has been completed, and it is worth looking forward to the full release of production capacity in 2024. 2) Due to the impact of the shrinking raw material market and fierce competition, the Chongqing Yaohui and Jinchang high energy projects have not fully achieved the expected profit level in 2023. The company has adjusted internal management and operation strategies in a timely manner according to the market and operating conditions, and continues to vigorously explore the receiving market. The business situation is expected to improve in 2024.
Copper prices will rise, and the company's resource sector will benefit. 1) The hazardous solid waste recycling business model is to earn the difference in the purchase and sale of metals, and the price of copper rises, and hazardous waste recycling companies benefit significantly. 2) Simplified calculation: Assuming that the company's sales volume of electrolytic copper products is 80,000 tons in 2024, and the discount coefficient for the main raw materials in the company's operations remains unchanged, without considering changes in hedging and other operating costs, assuming that the income tax rate is 15%, minority shareholders' equity is the same as in 2023, and using SHFE copper's average price of 67222 yuan/ton as the base. Assuming that the average price of copper rises 1% throughout 2024, the net profit of the corresponding company will increase by 40 million yuan.
Solid waste treatment and environmental remediation businesses are developing steadily. 1) Improve the quality and efficiency of the incineration business and explore synergy effects. 2) The environmental restoration business strengthens risk management and control of new orders, and is basically stable.
Risk warning. The progress of the project fell short of expectations, sharp fluctuations in commodity prices, etc.