Net profit attributable to mother +19% YoY, maintaining the “Buy” rating
Yingfeng Environmental released its annual report. In 2023, it achieved revenue of 12.631 billion yuan (yoy +3.06%), net profit of 498 million yuan (yoy +19.00%), and deducted non-net profit of 445 million yuan (yoy +36.95%). Among them, Q4 achieved revenue of 3.641 billion yuan (yoy -5.12%, qoq +27.39%) and net profit to mother of 105 million yuan (yoy -0.25%, qoq -145.48%). In 1Q24, the company achieved revenue of 2,998 billion yuan, +12.2% year-on-year, and net profit of 172 million yuan to mother, +10.3% year-on-year. We expect the company's 2024-2026 EPS to be 0.28, 0.34, and 0.41 yuan respectively. Comparatively, the company Wind unanimously expected an average PE value of 15.4 times. Considering the company's stable position as a leader in sanitation equipment, the company was given 21.6 times PE in 24, with a target price of 6.05 yuan (previous value of 6.47 yuan), maintaining a “buy” rating.
In 2023, the company's new energy equipment sales volume was +44% year-on-year
According to data from Jiaotong Insurance of the State Monetary Authority, the number of sanitation vehicles sold nationwide in '23 was 76,300 units (-6.2% YoY), of which 6098 pure electric vehicles were sold (+30.7% YoY). The company sold 12,300 units of sanitation equipment throughout the year (-10.4% year on year), of which 1974 units of new energy equipment were sold (+44.2% year on year). The gross margin of sanitation equipment was +1.8pp to 27.7% year-on-year. We believe this is mainly due to the increase in the share of new energy with high gross margin. The company's leading position in the industry is stable. Benefiting from the new energy trend and the comprehensive electrification of public sector vehicles (80% penetration rate target in the pilot zone), the new energy equipment business is expected to continue to drive the company's performance growth.
In 2023, the company's sanitation service revenue was +35% year-on-year
Newly signed projects entered operation one after another, driving the company's 23-year sanitation service revenue +35.4% to 5.63 billion yuan, and gross margin +1.3pp to 16.7% year over year. The national sanitation market continues to grow. According to statistics from Environmental Sinan, in '23, the total annual turnover of the national sanitation market was 91.6 billion yuan and the total number of contracts was 252.8 billion yuan, all of which reached record highs. Yingfeng Environmental added an annualized contract amount of 1.55 billion yuan, a total of 7.65 billion yuan of additional contracts, and a total of 43.8 billion yuan of contracts pending execution. Its sustainable management capacity is among the highest. The company has built a “mechanized operation+intelligent operation+standardized service” operation ecosystem. The industry continues to lead, and its performance is expected to achieve steady growth.
Operating cash flow was -16.7% YoY in 2023, with a dividend payout ratio of 79% of the 2023 company's accrued asset impairment loss of $123 million, of which 86.01 million yuan of goodwill impairment was prepared for the acquisition of the Zhonglian environment. The main reasons were due to the decline in sales volume in the sanitation equipment market in 23 years; the accrued credit impairment loss of 216 million yuan, including loss of 219 million yuan in bad debts; and operating cash flow was -16.7% to 1.39 billion yuan YoY. In '23, the company plans to pay a dividend of $0.125 per share, with a dividend ratio of 79% and a dividend ratio of 2.4%.
In 21-23, the company's total cash dividends were 1,056 million yuan, with dividend payout ratios of 41%, 83%, and 79%.
Risk warning: Asset impairment and credit impairment exceed expectations, sanitation equipment sales fall short of expectations, sanitation marketization process falls short of expectations.