Introduction to this report:
The reduction in the number and scale of projects under construction affects the company's revenue. Incineration production capacity has been steadily released, and 4,600 tons of additional production will be put into operation in 2023. The company increased its cash dividend ratio to 33% in 2023.
Key points of investment:
Maintain an “Overweight” rating. We lowered the company's projected net profit for 2024-2025 and increased 2026 to 6.88 (-26%), 7.41 (-29%), and 788 million yuan, respectively. The corresponding EPS was 0.49, 0.53, and 0.57 yuan respectively, and the target price was lowered to 7.84 yuan to maintain the “gain” rating.
The 2023 results are in line with expectations. 1) In 2023, the company achieved revenue of 3,956 billion yuan, a year-on-year decrease of 13%; attributable net profit of 629 million yuan, a year-on-year decrease of 16%; net profit without deduction of 618 million yuan, a year-on-year decrease of 16%; performance was in line with expectations. The reduction in the number and scale of projects under construction affected the company's revenue. In 2023, the company's construction revenue was 815 million yuan, a significant decrease of 53% over the previous year. Operating revenue was $2,744 million, up 13% year on year; interest income was 396 million yuan, up 3% year on year; operating profit grew steadily. 2) In 2023, the company's comprehensive gross margin was 38.52%, up 4.14pct year on year; net profit margin was 16.77%, down 0.41pct year on year. The share of construction revenue with low gross margin in total revenue decreased by 18% compared to the same period last year, and the share of operating revenue in total revenue increased compared to the same period last year, driving a significant recovery in the company's overall gross margin. 3) In terms of cash flow: The net cash flow from the company's operating activities in 2023 was 978 million yuan, down 19% year on year, mainly due to the year-on-year decrease in national reimbursements received by the company in 2023.
Incineration production capacity has been steadily released. 1) In 2023, the company added 4,600 tons/day of incineration production capacity. Projects such as Shuozhou, Huludao, Wuhan Phase II, and Zhangqiu Phase II were officially put into operation after completing “72+24” hours of trial operation. 2) By the end of 2023, the company operated a total waste incineration production capacity of 39,500 tons.
The dividends are gradually increasing. The company plans to distribute a cash dividend of 209 million yuan (tax included) in 2023. The company's cash dividend accounted for 33% of net profit in 2023, which is a significant increase from the 2022 cash dividend ratio of 22%. With the further reduction in capital expenditure, it is expected that there is still plenty of room for improvement in the future.
Risk warning: Project progress falls short of expectations, industry policy changes, etc.