Incident: In 2023, the company achieved operating income of 6.025 billion yuan, an increase of 34.66%; net profit to mother was 2,048 billion yuan, an increase of 23.09%; the weighted average ROE increased by 0.62 pct to 20.04% year on year.
Revenue from environmental protection operations grew steadily, and equipment revenue increased 56%. The company's revenue and profit increased significantly in 2023. By business, 1) Environmental operation: revenue of 3,076 billion yuan, increase of 18.97%, gross profit margin of 59.34%, same increase of 2.63pct, 2) Equipment manufacturing and service: revenue of 2,917 billion yuan, same increase of 56.45%, gross profit margin of 34.90%, same increase of 1.01 pct. 2023Q4's revenue was 1.03 billion yuan, +22.27% YoY, -18.79% YoY, net profit of 478 million yuan, +16.98% YoY, -12.38% month-on-month, mainly due to confirmed a slowdown in equipment revenue, 2023Q4 equipment revenue of 578 million yuan, -36.87% month-on-month, and operating revenue of 814 million yuan, +0.99% month-on-month. Net operating cash flow in 2023 was $2,321 billion, up 5.87% from the same period. Net investment cash flow was $2.50 billion, compared to $3,035 billion in the same period last year.
The scale of solid waste operation continues to accumulate. By the end of 2023, the proportion of waste incineration under construction/construction was about 19%. 1) Waste incineration: At the end of 2023, the company's waste incineration power generation operation and trial operation scale was about 34,200 tons/day (excluding shareholding and commissioned operation projects), an increase of 7% over the previous year. According to the detailed statistics of the project, the scale of the holding project under construction was about 0.65 million tons/day, with a ratio of about 19% under construction/construction. In 2023, the holding operation project completed a total of 11.7633 million tons of garbage, an increase of 26.27% over the previous year. Of these, the amount of domestic waste stored was 11.20,700 tons, up 25.98% year on year, completed feed-in power consumption of 3.158 billion kilowatts, up 21.10% year on year, and 282 kilowatts of internet connection per ton, down 4% year on year. Increased heat supply affected power generation. In 2023, the amount of steam supplied to the outside world reached 54,800 tons, an increase of 35% year on year. 2) Kitchen: Treated 427,700 tons of food waste in 2023, up 26.87% year on year, sales of 14,400 tons of by-product grease, up 39.67% year on year, 3) Sludge: treated 134,800 tons of sludge, up 53.83% year on year, 4) Waste removal: completed household waste removal volume of 1.292,300 tons, up 10.03% year on year, completed food waste removal volume of 282,300 tons, up 16.41% year on year.
The total number of new equipment contracts signed in 2023 was 3,545 billion yuan, and the performance of new materials and equipment was outstanding. In 2023, the company's environmental power generation project equipment sales contract was about 478 million yuan; the new material equipment sales contract was about 3,067 million yuan. Customers include Zhejiang Yongxu Mining Group, Weiming Shengqing and Grimmie related companies.
With the integrated layout of the new materials industry chain at home and abroad, high-ice nickel is expected to be put into operation in 2024. The company actively lays out high-ice nickel smelting and production in Indonesia, and is actively developing large-scale production and construction of ternary precursor and high-nickel ternary cathode materials domestically. It is expected that after the entire project is put into operation, it will achieve a production capacity of 130,000 tons/year for high-ice nickel nickel-containing metals, and 200,000 tons/year for high-nickel ternary cathode materials. In 2023, the civil construction of the 40,000 ton high ice nickel project of the subsidiary Carman Company was basically completed, and installation of the equipment has begun. We expect to put into operation in 2024; the subsidiary Carman Company's 40,000 ton high ice nickel has obtained a registration and overseas investment certificate. The civil construction of the Wenzhou lithium battery new material project has basically been completed, equipment installation has begun, and a new phase of land has been acquired. In 2023, the company signed a joint venture agreement for a 100,000 ton battery electrolyte project, a joint venture agreement for the production of nickel raw materials for new energy use in Indonesian laterite nickel ore smelting (20,000 tons of nickel/year), a strategic cooperation framework agreement for a high-purity electrolytic nickel project with an annual output of 50,000 tons, and a multi-dimensional layout of the new materials project.
Profit forecast and investment rating: Solid waste operations are increasing steadily, equipment is expanding to the field of new materials, and high-ice nickel projects are about to be put into operation. Based on the progress of the project and orders, we maintain our net profit forecast of 2,774 billion yuan in 2024 and increase it from 3.394 billion yuan to 3.612 billion yuan in 2025. We expect net profit to be 4.514 billion yuan in 2026, corresponding to 12/9/8 times PE, maintaining a “buy” rating.
Risk warning: Project progress falls short of expectations, policy risks, and industry competition intensifies.