Incident: On April 26, the company released its 2023 annual report. In 2023, it achieved operating income of 3.178 billion yuan, a year-on-year decrease of 5.14%; net profit to mother was 603 million yuan, a year-on-year decrease of 17.13%; net profit after deducting non-return to mother was 602 million yuan, a year-on-year decrease of 11.74%; and a cash dividend of 3 yuan (tax included) was distributed for every 10 shares. The company released its 2024 quarterly report, achieving operating income of 786 million yuan, a year-on-year decrease of 9.08%; net profit to mother of 181 million yuan, an increase of 10.69%; net profit after deducting non-return to mother of 181 million yuan, an increase of 11.41% year-on-year.
Prices of various projects have been raised, and the solid waste business has shown the role of a “ballast stone”: in 2023, the company achieved operating revenue of 2,218 billion yuan from domestic waste projects, an increase of 5.31% over the previous year; the total production capacity of in-hand waste incineration power generation was 22,920 tons/day, and production capacity was 21,220 tons/day, and production capacity of 700 tons/day and 1000 tons/day, respectively. In 2023, the company achieved a cumulative power generation capacity of 2,922 million kilowatts, and a cumulative garbage storage volume of 9.2369 million tons, up 3.68% and 3.83% year on year respectively; heating was 1.04 million tons, up 4.15% year on year.
In 2023, the company has built and put into operation a food treatment capacity of 2,650 tons/day, and production capacity of 160 tons/day and 510 tons/day are in the trial operation and construction stages, respectively; it has completed 738,300 tons of food waste treatment, an increase of 19.16% over the previous year. In 2023, the company successfully adjusted the prices of garbage disposal fees for six project companies, with increases ranging from 4 to 55 yuan/ton. The company's solid waste treatment business is progressing steadily, continuing to contribute cash flow, and play the role of a “ballast stone”. In the first quarter of 2024, the company achieved a cumulative power generation capacity of 724 million kilowatts and a cumulative garbage storage volume of 2,312,900 tons, an increase of 4.31% and 3.02% year-on-year respectively; heating was 356,600 tons, an increase of 7.38% over the previous year.
Lithium battery recycling is under pressure, and recycled rubber is worth paying attention to: In 2023, Lixin New Materials Co., Ltd. produced its own cobalt-nickel-lithium and processing output totaled 1779.38 gold tons. Affected by the decline in metal prices, Deqing Lixin prepared an inventory price reduction of 80 million yuan and calculated goodwill impairment reserves of 0.15 million yuan, which had an impact on the company's overall profitability. The recycled rubber project Nantong Huili Phase I 30,000 ton butyl reclaimed rubber production line has been officially put into operation, and the second phase production line containing 50,000 tons of butyl reclaimed rubber, 40,000 tons of recycled tire rubber, and 15,000 tons of vulcanized rubber powder has entered trial operation. The company expanded the scope of recycled rubber business and carried out mapping and sourcing of waste tire volumes, rubber powder and reclaimed rubber companies in various countries. Nantong Huili is resuming dealings with customers from many brands. The impact of the relocation of the main plant is still being eliminated. As customers gradually return, the recycled rubber business is expected to improve.
Investment suggestions: The operating capacity of the company's main solid waste business has been increased, processing fees for multiple projects have been raised, and it continues to play the role of a “ballast stone”; the resource recycling business is under pressure in the short term, and recycled rubber is worth paying attention to. Based on the company's operating conditions and maintaining the company's profit forecast, EPS is expected to be 1.67/1.91 yuan/share in 24/25, respectively, and 2.12 yuan/share for the additional 26 years, corresponding to the closing price PE on April 26, which is 8/7/7 times, respectively. Maintain 10 times PE for 24 years, target price 16.70 yuan/share, and maintain a “careful recommendation” rating.
Risk warning: industry policy risks; commodity price fluctuations; industry competition intensified; project commissioning fell short of expectations.