Core views:
Gas profit recovery and solid waste profit were steady, and the first quarter results exceeded expectations. The company released its 2024 quarterly report: 24Q1 achieved revenue of 2,716 billion yuan (-3.08% YoY) and net profit to mother of 381 million yuan (+22.84% YoY). The decline in revenue was mainly due to a contraction in the solid waste engineering business. Excluding this impact, the company's revenue increased by 130 million yuan. The operation of the Guiyang and Guiping projects contributed revenue in '23, and benefiting from improved sales price spreads in the natural gas business, the company's energy business achieved net profit of 41 million yuan in the first quarter (an increase of 52 million yuan over the previous year), and the 24Q1 performance exceeded expectations.
Q1 Operating cash flow has improved drastically, and cash flow will continue to improve throughout the year. The company and local governments jointly promoted the improvement of charging mechanisms, increased operating repayments for solid waste and drainage businesses, and achieved net operating cash flow of 342 million yuan in 24Q1 (-192 million yuan in 23Q1). According to the 23 annual report, the company is expected to settle the repayment of at least 2 billion of its existing accounts receivable in 2024, with the support of relevant governments. In addition, the company's 24Q1 capital expenditure was about 475 million yuan (excluding impact No. 14). Along with the successive completion of projects under construction and a decrease in newly started projects, the company expects capital expenditure for new projects to shrink to about 1.38 billion yuan in 2024, and free cash flow will continue to be optimized.
The dividend rate was raised to 27%, the three-year dividend plan was released, and the growth+dividend attributes resonated. In 2023, the company plans to pay a cash dividend of 0.48 yuan (tax included) per share (+118% year over year), totaling 391 million yuan in cash dividends, accounting for 27.38% of net profit due to mother in '23, corresponding to the latest dividend rate of about 2.59%. The company also issued the “Shareholder Dividend Return Plan (2024-2026)”. Cash dividends distributed per share over the next 3 years will increase by no less than 10% year-on-year. If the total share capital increases, the company will maintain this plan, demonstrating the company's confidence in maintaining “growth and dividends.”
Profit forecasting and investment advice. The estimated net profit for 24-26 will be 15.82/17.08/1,814 billion yuan, corresponding PE 9.52/8.81/8.30 times. Maintain the previous reasonable value of 29.10 yuan/share, corresponding to the 2024 15xPE valuation, and maintain the “buy” rating.
Risk warning. REITs promote low expectations; low expectations for order acquisition; low expectations for subsidy disbursements, etc.