Introduction to this report:
The operating business is developing steadily, and the equipment sales business is growing rapidly. Cash flow is abundant, and dividends are rising steadily.
Key points of investment:
Maintain an “Overweight” rating. We lowered the company's projected net profit for 2024-2025 and increased 2026 to 12.59 (-14%), 13.72 (-16%), and 1,498 billion yuan, respectively, and the corresponding EPS to 0.75, 0.82, and 0.89 billion yuan, respectively. The company was given 12 times PE in 2024, and the target price was lowered to 9.00 yuan.
The overall operation is steady. 1) In 2023, the company achieved revenue of 6.027 billion yuan, an increase of 0.06% over the previous year; attributable net profit of 1,166 billion yuan, an increase of 2.33% over the previous year. 2) Net profit attributable to 2023Q4 was 181 million yuan in a single quarter, down 49% month-on-month and 35% year-on-year, lower than market expectations, mainly due to one-time confirmation of prior year subsidies for the same period in 2022. 3) In terms of profit margin, the 2023 company's comprehensive gross profit margin was 31.76%, and the net profit margin was 20.18%, which is basically the same as in 2022.
The operating business is developing steadily, and the equipment sales business is growing rapidly. 1) By the end of 2023, the holding project was put into operation at 39,950 tons/day, with a share participation of 15,100 tons/day; waste incineration production capacity under construction and preparation is 6200 tons/day. 2) The annual garbage disposal volume of the holding project was 14.4 million tons, an increase of 13% over the previous year, and the amount of garbage disposal increased steadily. The incoming tonnage without heating generated 424 degrees per ton, the average plant electricity consumption rate was 12.28%, and the operating level was excellent. 3) The total contract amount for Sanfeng Cavanta is over 600 million yuan, and the total contract amount for Sanfeng Technology is about 250 million yuan. It has strong equipment capabilities and rapid development of equipment orders.
Cash flow is abundant, and dividends are rising steadily. 1) Along with the increase in the scale of operations, the company's overall net cash flow from operating activities increased to 2,372 billion yuan. 2) The number of projects under construction has decreased, and the company's capital expenditure is expected to decline further in 2024. 3) In 2023, the company plans to distribute cash dividends of 394 million yuan. The cash dividend ratio has slightly increased to 34% compared to the previous year. The peak of capital expenditure has passed, and there is room for improvement in the company's dividends. It is expected that the company's dividends will continue to increase steadily in the future.
Risk warning: Project progress falls short of expectations, industry policy changes, etc.