Introduction to this report:
Factors such as the short commissioning time of the solid hazardous waste recycling project and falling inventory prices dragged down the company's performance in 2023. At present, the company's main resource projects have all been optimized, and we look forward to the release of results in 2024.
Key points of investment:
Maintain an “Overweight” rating. We lowered the company's projected net profit for 2024-2025 and increased 2026 to 9.08 (-21%), 9.97 (-26%), and 1,084 billion yuan respectively, corresponding EPS to 0.59, 0.65, and 0.71 yuan, respectively, and lowered the company's target price to 9.85 yuan to maintain the “gain” rating.
Factors such as the short commissioning time of the solid hazardous waste recycling project and falling inventory prices dragged down the company's performance in 2023.
1) In 2023, the company achieved revenue of 10.580 billion yuan, a year-on-year increase of 21%; attributable net profit of 505 million yuan, a year-on-year decrease of 27%; deducted non-vested net profit of 442 million yuan, a year-on-year decrease of 33%. The 2023Q4 single quarter achieved revenue of 3,090 billion yuan, an increase of 20% year on year; attributable net profit - 153 million yuan, a year-on-year decrease of 270%. 2024Q1 achieved revenue of 3.125 billion yuan, up 80% year on year, and attributed net profit of 194 million yuan, down 6% year on year, gradually improving. 2) The decline in profits is mainly due to the short operation time of solid and hazardous waste recycling projects and the low production capacity load, which makes production and operation costs high; in addition, the loss of inventory prices due to fluctuations in the prices of some commodities and the increase in hedging costs.
In 2024, solid hazardous waste recycling business operations improved, and an inflection point has been reached. At present, the company has perfected the layout of the entire industry chain from initial processing of waste resources to deep processing and utilization. Major resource projects have all been optimized. Among them, Jiangxi Xinke has now completed technical reforms. For example, after entering full production, it can achieve an annual production capacity of about 100,000 tons of cathode copper, 2,000 tons of tin ingots, 1,500 tons of lead ingots, 3 tons of gold ingots, 120 tons of silver ingots, and 10,000 tons of nickel sulfate. It is expected that production will be successfully put into operation in 2024 and profits will be released.
Cash flow from operating activities is expected to continue to improve. The company's net cash flow from operating activities in 2023 was -953 million yuan, mainly due to an increase of 2,328 billion yuan in inventory at the end of the 2023 reporting period over the previous period. With the gradual release of Jiangxi Xinke's production capacity, operating cash flow has gradually improved since 2023Q3.
Risk warning: Project progress falls short of expectations, sharp fluctuations in commodity prices, etc.