Integrating knowledge and action to create a new benchmark for solid waste disposal: Yongxing Co., Ltd. focuses on “harmless, reduced, and resourced” treatment of solid waste, and is the only investor and operator in Guangzhou's waste incineration power generation project. The company has 14 waste incineration power generation projects, with a total production capacity of 32090 tons/day and 4 biomass treatment projects, with a total production capacity of 2,590 tons/day. In China, the company pioneered the use of medium temperature sub-high pressure, sub-high temperature and ultra-high pressure belt furnace reheating parameter units (13 MPa/485°C/420 °C) and advanced flue gas treatment technology for the whole process of “double deacidification plus double denitrification”.
The company's business structure is stable, operating income dominates, cash flow is good, projects have basically been put into operation, and capital expenditure is on a downward trend.
Growth section: Technology leadership, capacity utilization rate improvement: On the technical side, the company independently innovated and developed various incinerator types with a daily processing capacity of 250 tons to 900 tons, and also developed an ACC automatic incineration control system. The automatic input rate reached more than 95%, saving labor and material consumption, and laying the foundation for cost reduction and efficiency. The company pioneered the use of sub-high temperature and ultra-high pressure units (13 MPa/485℃/420 ℃) to further improve the overall power generation efficiency of the unit, effectively reduce the energy consumption level of the generator set, and set an industry benchmark. With the support of endogenous growth in primary waste and the increase in the contribution of old landfill waste, we expect the company's waste incineration treatment capacity to reach 11 million tons in 2026, corresponding capacity utilization rate of nearly 94%. If industrial solid waste mixing is considered, the company's overall waste incineration capacity utilization rate is expected to approach or reach 100%, and the economic benefits will improve markedly. Cogeneration projects have economic and ecological benefits, and Guangzhou's industrial development has a solid foundation. The company can fully explore downstream steam market demand, carry out heating services, and broaden profit margins.
Dividend section: The peak of commissioning has passed, and the high dividend attribute is strong: The waste incineration power generation industry has moved from an incremental stage to an inventory stage. Improving quality, reducing costs, increasing efficiency, and continuously improving project operation capacity will be an important support for the waste incineration power generation industry to achieve endogenous growth and maintain profitability. Relevant enterprises showed the following characteristics: profitability was relatively stable; capital expenditure was reduced and financial pressure was relieved; cash flow improved markedly, and gross profit margin and net interest rates rose. Overall, the waste incineration power generation industry already has high dividend potential. The company pioneered a stable and high dividend in the A-share waste incineration power generation industry, and proposed that the company's total profit distribution for the year 2023-2025 is not less than 60% of the distributable profit achieved in that year.
Investment suggestions: The company is deeply involved in the waste incineration power generation market in Guangzhou, with industry-leading core equipment production and application technology, leading the way in generating tons of waste; under the dual support of maintaining endogenous growth of native waste and increasing contributions from landfill waste, the company's capacity utilization rate is expected to increase steadily and growth certainty is strong; the waste incineration power generation industry already has high dividend potential, and the company pioneered stable and high dividends to pioneer the industry.
The company's EPS for 24/25/26 is expected to be 1.02/1.26/1.58 yuan/share, respectively, corresponding to the closing price on April 11, 2024, PE is 15/12/9 times higher, respectively. The company was given 18 times PE in 2024, with a target price of 18.32 yuan/share. It covered for the first time, and gave it a “careful recommendation” rating.
Risk warning: Policy progress falls short of expectations; local financial pressure; there is uncertainty about endogenous growth in native waste.