Losses in lithium battery recycling and rubber recycling drag down performance
Wangneng Environmental released its annual report. In 2023, it achieved revenue of 3.178 billion yuan (yoy -5.14%), net profit to mother of 603 million yuan (yoy -17.13%, adjusted), and deducted non-net profit of 602 million yuan (yoy -9.83%). Among them, Q4 achieved revenue of 777 million yuan (yoy -23.86%, qoq -9.63%) and net profit to mother of 86.5897 million yuan (yoy -53.88%, qoq -47.68%). The company's 2023 annual report plans to pay a dividend of 0.30 yuan per share, with a cumulative total of 0.52 yuan for the whole year, with a dividend ratio of 37% and a dividend ratio of 3.7%. The company achieved revenue of 786 million yuan in 1Q24, -9.1% year-on-year, and net profit of 181 million yuan to mother, +10.7% year-on-year. We expect the company's 2024-2026 EPS to be 1.66, 1.86, and 2.01 yuan respectively. Comparatively, the company's 24-year Wind unanimously expected the average PE value to be 11.2 times, giving the company 11.2 times PE in 24, with a target price of 18.59 yuan (previous value 25.05 yuan), maintaining a “buy” rating.
Domestic waste/food waste operating revenue +5/ 12% year-on-year
The company achieved revenue of 2,218 billion yuan in domestic waste operations in 23 years, +5.31% over the same period last year. The manual production capacity of waste incineration reached 22,920 tons/day, of which the production capacity in operation/trial operation/construction was 21220/700/1000 tons/day. In '23, the amount of domestic waste stored was 9.24 million tons, +11.6% year-on-year, and the feed-in electricity volume was 2,457 billion kilowatts, +3.4% year-on-year.
In '23, the company successfully raised garbage disposal fees for 6 projects. Among them, South Taihu Lake environmental protection was raised from 100 yuan to 155 yuan, while other projects increased by 4 to 20 yuan. The company is actively expanding the food waste business. The annual revenue of the food waste operation business was +11.63% year-on-year to 363 million yuan. Production capacity of 800 tons was officially added in '23, and production capacity was 3,320 tons/day at the end of '23, of which 2650/160/510 tons were put into operation/trial operation/preparation for construction.
Loss on lithium battery recycling and rubber recycling
In 2023, the company's lithium battery recycling business revenue was 86 million yuan (yoy -65%), with a gross profit margin of -16.28% (yoy-36.33pp), mainly due to a sharp drop in lithium battery material prices; due to falling metal prices, inventory/goodwill depreciation of 0.80/15 million yuan, the net profit from the lithium battery recycling business decreased by 66 million yuan year-on-year.
The rubber recycling business revenue was 103 million yuan (yoy +507%), gross profit margin -7.41% (yoy+13.49pp); the first phase of Nantong Huili's 30,000 ton butyl reclaimed rubber production line has been officially put into operation, and the second phase has entered trial operation; after the plant was relocated, the loss was 25 million yuan due to slow customer return and insufficient capacity utilization, a year-on-year decrease of 54 million yuan (confirmed non-operating income of 31 million yuan in '22 due to relocation compensation).
Risk warning: Waste incineration project operation risks, increased competition in the lithium battery recycling market, and the profitability of recycled rubber projects falls short of expectations.