Incident: On April 29, the company released its 2024 quarterly report, achieving operating income of 2,716 billion yuan, a year-on-year decrease of 3.08%; net profit to mother of 381 million yuan, an increase of 22.84% over the previous year; net profit after deducting non-return to mother was 370 million yuan, an increase of 23.19% year-on-year.
The energy business improved year on year, and cash flow is expected to improve: in 1Q24, due to improved sales differences in the natural gas business, the company's energy business achieved net profit of 41 million yuan, an increase of 52 million yuan over the previous year. In 1Q24, the company achieved a net cash flow of 342 million yuan from operating activities, an increase of about 534 million yuan over the previous year, mainly benefiting from the increase in operating payments from the solid waste business and drainage business. With the gradual implementation of the fee disbursement mechanism, the company's cash flow is expected to improve further. In 1Q24, the company's capital expenditure was about 475 million yuan, and it is estimated that additional project capital expenditure will be about 1.38 billion yuan for the full year of 2024.
Solid waste operation contribution increase, cogeneration efficiency: In 1Q24, the company's solid waste treatment business achieved main business revenue of 1,432 billion yuan, down 5.91% year on year, mainly affected by the decline in the scale of solid waste engineering related business; waste incineration treatment capacity was 3.228,500 tons, up 8.93% year on year; ton power generation capacity and ton of feed-in electricity were 377.91 degrees per ton and 328.87 degrees per ton, respectively, which is basically the same as in the first quarter of 2023; the capacity utilization rate was about 122%, up about 5 pcts year on year. In addition, the company actively developed pipeline heating and mobile heating, and achieved 303,500 tons of external heating in 1Q24, an increase of 34.77% over the previous year. By the end of March 2024, the company had an in-hand waste incineration power generation capacity of 35,750 tons/day, with a production capacity of 29,800 tons/day, and a production capacity of 5,950 tons/day still under construction/unbuilt. The gradual commissioning of additional production capacity is expected to increase the company's performance.
The energy and water business is developing steadily, consolidating cash flow: in 1Q24, the company's energy business achieved main business revenue of 854 million yuan, an increase of 0.50% over the previous year; natural gas sales volume of 215 million meters? , up 0.76% year on year; liquefied gas sales volume was 0.58 million tons, up 9.43% year on year; hydrogen supply was 181.91 tons, up 319.63% year on year, mainly due to the completion and operation of the kitchen waste hydrogen production project. In 1Q24, the company's water supply business achieved revenue of 221 million yuan, an increase of 4.82% over the previous year, mainly due to the year-on-year increase in water sales; the drainage business achieved main business revenue of 159 million yuan, an increase of 0.12% over the previous year.
Investment suggestions: The asset structure of the company's solid waste sector continues to be optimized, and reserve projects are abundant; the price spread of natural gas has improved, which is expected to remain profitable; overall water operations are steady, providing stable cash flow. According to business conditions, the company's profit forecast is maintained. The company's EPS for 24/25/26 is estimated to be 1.87/2.11/2.29 yuan/share, respectively, corresponding to the closing price of April 29, 2024, which is 10/9/8 times PE, respectively, giving 12.0 times PE in 2024, and a target price of 22.44 yuan/share, maintaining a “careful recommendation” rating.
Risk warning: industry policy risks; fluctuating raw material prices; increased industry competition.