Key points of investment
Incident: The company released its 2023 annual report, achieving annual revenue of 6.02 billion yuan, an increase of 34.7% over the previous year; net profit to mother of 2.05 billion yuan, an increase of 23.1% over the previous year. The net operating cash flow was 2.32 billion yuan, and the balance ratio was 47.99%, of which the interest-bearing debt ratio was 27.14%.
Operating revenue increased 18.97% year over year to 3,076 billion yuan, with a gross profit margin of 59.34%. In 2023, the company's various holding operations completed a total of 11.20,700 tons of household waste storage, an increase of 25.98%; completed feed-in electricity capacity of 3.158 billion kilowatts, an increase of 21.10% over the previous year; by the end of 2023, the company controlled 49 waste incineration operation projects (including 1 trial operation), with an investment scale of about 34,200 tons/day (excluding shareholding and commissioned operation projects).
The new materials and equipment business helped the company increase its equipment sales revenue significantly. In 2023, the company achieved equipment sales and EPC business revenue of 2,917 billion yuan, an increase of 56.45% over the previous year. Affected by the gradual decline in the scale of waste incineration projects under construction, environmental protection equipment revenue has declined year by year since peaking in 2021. The company's new materials and equipment business began to gain strength in 2023, and equipment sales contracts were signed with customers such as Yongxu Mining, Jiawei New Energy, and Grimmie, for a total amount of about 3,067 billion yuan.
The new materials business is poised to start harvesting in 2024. At present, the civil construction of the first Jiaman project, which produces 40,000 tons of high-ice nickel per year, and the Wenzhou Cathode Materials Project has basically been completed, and the equipment installation stage has begun. At present, the company has formed a layout of 130,000 tons of high-ice nickel (equity scale of 77,500 tons) +200,000 tons of high-nickel ternary cathode material (equity scale: 120,000 tons). With the resource advantages of cooperation with Aoyama Holdings and its excellent cost control capabilities, the company locks in raw materials (nickel, cobalt, lithium) upstream and binds downstream customers (Ruipu and Sunwanda) as a “latecomer” in the battery materials field. There is a possibility that it will take the lead later.
Profit forecasting and valuation
The construction of the company's 40,000 ton high-ice nickel project and cathode materials project is in line with expectations, and is expected to start contributing revenue and profit in 2024. The company's net profit for 2024-2026 is estimated to be 28.3/35.5/4.24 billion yuan, respectively, with corresponding earnings per share of 1.66/2.08/2.48 yuan. The PE corresponding to the current stock price is 12.10/9.65/8.08 times, giving it a “buy” rating.
Risk warning
The progress of the operation project fell short of expectations, equipment sales fell short of expectations, the progress of the new materials business fell short of expectations, and the price of high-ice nickel fell