Opinions:

First, release the bureau's entire environmental protection industry chain, and gradually switch between new energy sources and new kinetic energy. Since its launch in 2011, the company has gradually expanded businesses such as soil remediation, waste incineration, hazardous waste disposal, new energy operation and new energy engineering EPC, forming an entire environmental protection industry chain. After the traditional hazardous waste treatment business came under pressure, the company gradually implemented dual-carbon business layouts such as distributed photovoltaics and energy storage construction and operation, driving continuous profit growth. The company expects to achieve net profit of 0.6-85 billion yuan in 2023, turning losses into profits over the same period last year, and the new energy business is gradually becoming a new driving force for the company's performance growth.

The construction of photovoltaic projects has repeatedly received new orders, and the construction of energy storage projects is expected to become a new growth point. Since 2023, the company has repeatedly received orders for photovoltaic engineering construction projects such as distributed photovoltaics, household photovoltaics, and agricultural photovoltaics in Hunan, Guangxi, Guangdong and other places. In 2022, the company signed the first 12 MWh energy storage power plant project, and in 2023, it acquired Erkang Pharmaceutical's integrated optical storage project and 4 additional user-side energy storage projects, including Chongqing Jinghongyi and Chongqing Narita. With the rapid increase in the capacity of new energy installed and connected to the grid, the superposition user-side energy storage business model is gradually becoming clear. Demand for energy storage power plant construction is expected to increase further, and the energy storage engineering construction business is expected to receive more orders, becoming a new growth point for the company's performance.

New energy operation projects are distributed across the country, and high gross margins are expected to boost profitability. The company is based in Hunan and has a nationwide layout, and has invested and operated photovoltaic power plants in Hubei, Shaanxi, Guangdong and other places. In terms of acquiring new projects, the company has set up dedicated new energy marketing teams in Hunan, Jiangxi, Guangdong, Chongqing, Sichuan, Zhejiang and other places to actively expand new energy businesses such as distributed photovoltaics and user-side energy storage. Referring to the financial performance of A-share photovoltaic operators, the average gross margin of the photovoltaic power generation industry in the past 3 years was around 60%, far higher than the company's overall gross margin level of 25.1% in the first three quarters of 2023. With the launch of a number of high-quality new energy operating assets in the future, the company's profitability is expected to increase further, driving continued growth in performance.

Profit forecast and investment rating: The company has a full environmental protection industry chain, actively lays out new businesses to build and operate distributed photovoltaics and user-side energy storage, and has gradually become a new driving force for the company's performance growth. It is estimated that in 2023-2025, the company's net profit to mother will be 0.80/1.50/182 million yuan, respectively, and the corresponding PE will be 48.5/25.9/21.4 times, respectively, covered for the first time, and given an “increase in wealth” rating.

Risk warning: risk of fluctuations in electricity prices; risk of fluctuations in upstream raw material prices; acquisition of new energy projects falling short of expectations; construction of new energy projects falling short of expectations; risk of third party statistics; appropriate management.