Description of the event
Weiming Environmental Protection achieved operating income of 2,008 billion yuan in 2024Q1, an increase of 50.11% over the previous year, net profit of 712 million yuan, an increase of 40.29% over the previous year, and net profit after deducting non-return to mother of 669 million yuan, an increase of 39.69% over the previous year.
Incident comments
Environmental protection and new materials and equipment orders performed well, driving a high increase in revenue and performance in 2024Q1. 1) Project operations grew steadily. In 2023 and 2024Q1, the company launched a new waste incineration project of 5,000/600 (Changli project) tons/day, respectively, leading to a steady increase in garbage disposal volume. In 2024Q1, the holding garbage disposal project completed a total of 3.06 million tons of garbage storage (including 2.913,800 tons of domestic waste), an increase of 14.63% over the previous year, and completed 829 million kilowatts of feed-in electricity, an increase of 11.68% over the previous year. 2) Environmental protection and new materials and equipment contributed significantly. The company added a total of about 701 million yuan in orders for environmental protection and new materials and equipment in Q1 (an increase of 3,545 million yuan last year. Among them, the core customers for new material and equipment orders were mainly Grimmie, Zhejiang Yongxu Mining, and Weiming Shengqing, with contract amounts of 1,800 million yuan, 953 million yuan and 314 million yuan respectively).
New projects have led to an increase in accounts receivable. The cost ratio of the 2024Q1 company decreased by 1.44pct to 7.36% during the period, mainly the financial expense ratio decreased by 1.41pct to 3.19%. 2024Q1's net operating cash flow was 497 million yuan, up 32.01% year on year, but the revenue ratio decreased by 1.89pct to 63.16%, mainly due to electricity subsidies for new waste-to-energy projects. In addition, Q1 new energy equipment was sold, but there was a certain lag in cash flow.
New energy opens the ceiling for growth. 1) Overseas: The company laid out a 130,000 ton oxygen-rich side-blown high-ice nickel smelting project in Indonesia. Among them, the civil construction of Carman's 40,000 ton Indonesian high-ice nickel project has basically been completed and continues to advance. In July 2023, it participated in the Indonesian laterite nickel ore smelting project to produce nickel raw materials for new energy use (20,000 tons of nickel/year, holding 20% of the shares). 2) Domestic: Actively deploy integrated lithium battery material production capacity, and introduce cooperative companies to build a new energy industrial park with production capacity such as lithium salt, lithium battery materials, electrolytes, and recycling at the Wenzhou base. Among them, the Wenzhou lithium battery new material project obtained about 81.2 acres of new land in 2024Q1, and the main project of the nickel sulfate workshop has basically been completed. The company laid out a 200,000 ton ternary cathode integration project with Yongqing Technology, Sunwoda and Shengtun Mining. The company, Yongqing Technology, Gelin Mei, Wenzhou High-tech Zone, and Wenzhou Dongtou District each signed a framework agreement to lay out 100,000 tons of power battery and battery waste recycling capacity and 100,000 end-of-life vehicles; invest in the construction of 600,000 tons of nickel-cobalt-manganese sulfate crystal materials and 50,000 tons of ultra-high nickel ternary precursor material base with an annual output of 45,000 tons of high-purity lithium carbonate materials. With Xinzhoubang, Yongqing Technology, and Grimmie invested in the construction of three negative bases with an annual output of 100,000 tons of electrolyte materials, etc., to attract three negative bases with an annual output of 100,000 tons of graphite and insulating materials Membrane materials industry chain project. The company signed a framework agreement with the Wenzhou Bay New Area Management Committee to invest in the construction of a project with an annual output of 50,000 tons of high-purity electrolytic nickel.
As of 2024Q1, 35,400 tons/day of waste incineration projects were in operation within the scope of the company's consolidated statement, and the scale of the project under construction+preparation was 11,000 tons/day. As waste incineration projects are gradually put into operation in the future, the company's performance will gradually improve, and the new energy materials business is expected to start contributing profits in 2024. The company's net profit for 2024-2025 is estimated to be 2.99 billion yuan and 37.3 yuan respectively, and the corresponding PE is 11.6x and 9.3x, respectively, maintaining a “buy” rating.
Risk warning
1. Risk that the project progress falls short of expectations;
2. High ice nickel projects have low expected profitability risk.