Introduction to this report:
2024Q1's net profit increased 8% year over year, and steady operation was in line with expectations. At the end of the 20241Q1 period, the company had contracts of 18.36 billion yuan for environmental protection projects and 1.65 billion yuan for the sale of energy storage systems and equipment. There were sufficient orders in hand.
Key points of investment:
Maintain an “Overweight” rating. We maintain the company's projected net profit for 2024-2026 at 1,414, 17.05, and 2.07 billion yuan, respectively, and corresponding EPS of 1.31, 1.58, and 1.95 yuan, respectively. The company's new energy business is progressing in an orderly manner, and environmental orders are sufficient. Along with the gradual implementation of the transformation logic, the performance is expected to exceed expectations.
Maintain the target price of 18.41 yuan and maintain the “Overweight” rating.
The steady operation was in line with expectations. 1) 2024Q1 achieved operating income of 2,276 billion yuan, a year-on-year decrease of 6%; realized net profit of 119 million yuan, an increase of 8% over the previous year; and realized deducted net profit of 171 million yuan, an increase of 8% over the previous year. 2) 2024Q1's comprehensive gross margin increased by 0.65pct to 22.27% year on year; net profit margin increased 1.12pct year on year to 8.65%. The sales expense ratio increased by 0.25 pct to 2.46% year on year, and management, finance and R&D expenses decreased slightly year over year, to 5.18%, 1.43%, and 3.69%, respectively. Profit margins have improved slightly, and overall expense ratio control is good.
There are plenty of orders in hand. In the first quarter of 2024, the company added 2,311 billion yuan in environmental protection engineering contracts. The power industry accounted for 66.31% and the non-electric industry accounted for 33.69% of the new environmental protection project contracts. At the end of the period, the contract for environmental protection projects in hand was $18.36 billion, and the sales contract for energy storage systems and equipment was $1.65 billion.
The new energy business is being actively promoted. 1) In terms of scenery, the company relies on the Zijin Mine's clean energy business to fully develop, and the construction of the nearly 1GW wind and green power project is progressing smoothly. At the same time, keeping up with Zijin's overseas and domestic resources, a number of projects are undergoing preliminary work. 2) In terms of energy storage, Longjing Honeycomb's first phase 2 GWH PACK production line was put into operation in August 2023; the Shanghang 5GWh lithium iron phosphate energy storage battery project was successfully put into operation in January 2024; in 2023, the company had an energy storage contract of 1.56 billion yuan. The new energy business was actively laid out, and the pace of progress exceeded expectations.
Risk warning: Flue gas equipment sales, solid hazardous waste project management, new energy business development falling short of expectations, etc.