The company's revenue and profits are growing rapidly. In 2023, the company achieved revenue of 6.02 billion yuan, yoy +34.7%; net profit to mother was 2.05 billion yuan, yoy +23.1%. Among them, the project operation business reached 3.08 billion yuan, yoy +19.0%; equipment, EPC and services reached 2.92 billion yuan, yoy +56.5%. Q4 achieved revenue of 1.40 billion yuan in a single quarter, yoy +22.3%; net profit to mother reached 480 million yuan, yoy +17.0%.
Both revenue and profit increased in 2023, mainly due to the company's good operations, environmental protection project operating revenue and increased revenue from equipment, EPC and service businesses.
The ability to control expenses has been enhanced, and the level of profit remains high. The company's gross margin in 2023 was 47.5% (yoy+0.3pct), net profit margin 34.6% (yoy-3.0pct), and overall profit margin remained stable. The company's 2023 management expense ratio was 4.0% (yoy-0.02pct), financial expense ratio 3.9% (yoy-1.3pct), sales expense ratio 0.2% (yoy-0.2pct), and total three-fee expense ratio 8.2% (yoy-1.5pct), and cost control capabilities were enhanced. The company's net operating cash flow in 2023 was 2.32 billion yuan, yoy +5.5%, and cash flow continued to improve.
There are sufficient waste incineration projects in place to ensure steady growth in performance. In 2023, the company added 9 new waste incineration projects, including the Chengjiang project, and the Changli project was put into trial operation. As of the end of 2023, 49 waste incineration power generation projects were officially in operation and trial operation (including 1 trial operation). The operating scale of these projects was about 34,200 tons/day (excluding shareholding and commissioned operation projects). During the reporting period, the Zhijiang project and the Longnan project obtained EIA approval, and the Kunshan renewable resources project obtained project approval and EIA approval, and entered the construction phase. At the end of the period, the company held 8 waste incineration projects under construction (excluding trial operation projects), which are expected to support steady growth in performance.
The equipment business is making great strides and is expected to contribute to incremental performance. In 2023, the company completed the signing of environmental protection equipment: Chongyi County Domestic Waste Incineration Power Generation Project Project General Contract (90 million yuan); Zhongcheng (Beijing) Small Domestic Waste Incineration Project (100t/d) incinerator and waste heat boiler system contract (0.3 billion yuan); Fuyuan County Domestic Waste Incineration Power Generation Project Engineering General Contract (80 million yuan); Indonesia Qingshan Park Development Co., Ltd. Domestic Waste Incineration Treatment Equipment Procurement Contract (40 million yuan); Jingmen Gelin Mei Cogeneration Project Equipment and Installation Contract (240 million yuan) Yuan). The total contract amount for environmental protection equipment is about 480 million yuan. New materials were signed: Zhejiang Yongxu Mining Group Co., Ltd. equipment and system supply contract (950 million yuan); equipment procurement contract for Grimmie-related companies (1.8 billion yuan); Weiming Shengqing equipment engineering contract (310 million yuan). The total contract amount for new materials and equipment is about 3.07 billion yuan, which is expected to contribute to incremental performance.
The new energy materials business is progressing smoothly, and production capacity is expected to be implemented. During the reporting period, the civil construction of the 40,000 ton Indonesian high ice nickel project of the company's subsidiary Carman Company has basically been completed, and installation of equipment has begun; the 40,000 ton Indonesian high ice nickel project, which belongs to the company, has obtained an overseas investment registration certificate; the civil construction of the new materials project for Wenzhou lithium batteries has basically been completed, equipment has begun to be installed, and about 180 acres of new land have been obtained for the second phase of the project, effectively advancing construction progress. It is expected that the implementation of high-ice nickel and new battery materials projects will contribute to profits.
Investment advice: As a leader in private waste incineration, the company has excellent profitability. Ongoing projects fully support performance growth, and new energy projects are expected to open up room for incremental performance. We expect the company's 2024-2026 net profit to be 28.4/37.5/4.86 billion yuan, EPS 1.7/2.2/2.9 yuan respectively, and the corresponding PE is 12.4X/9.3X/7.2X, respectively, maintaining a “buy” rating.
Risk warning: Waste incineration policy risks, increased operating costs, and project progress falling short of expectations.