Description of the event
Yingfeng Environment achieved revenue of 12.631 billion yuan in 2023, up 3.06% year on year, net profit of 498 million yuan, up 19.00% year on year; in Q1 of 2024, it achieved revenue of 2,998 billion yuan, up 12.23% year on year, and net profit of 172 million yuan, up 10.31% year on year.
Incident comments
Sanitation equipment continues to prosper, and revenue from sanitation services is growing steadily. Looking at the business structure in 2023:1) Sanitation equipment revenue of 5.085 billion yuan, down 16.42% year on year, mainly due to insufficient procurement demand due to financial pressure from local governments. The industry sold 76,304 units in 2023, down 6.21% year on year, and industry sentiment continued to be sluggish. The company sold 14,903 units of sanitation equipment in 2023, down 15.68% year on year. It is estimated that middle and high-end sanitation equipment products will be more affected; 2) Sanitation service revenue was 5.630 billion yuan, up 35.38% year on year, mainly due to The company has added many new sanitation service orders in recent years, and the commissioning of projects has driven revenue growth. The amount of new annualized service contracts added by the company in 2016-2023 was 55 million yuan, 305 million yuan, 429 million yuan, 855 million yuan, 1,248 billion yuan, 1,553 million yuan, respectively. In 2023, the annualized amount of new contracts ranked second in the industry. As of the end of 2023, Yingfeng Environmental operated a total of 263 urban service projects, with an annualized contract amount of 6.567 billion yuan in the stock market to ensure the company's performance durability.
Gross profit margin rebounded steadily, and the cost ratio increased during the period. The company's comprehensive gross margin in 2023 was 22.84%, up 0.10pct year on year. Among them, the gross margin of the sanitation equipment business increased by 1.79 pct to 27.71%, and the gross margin of the sanitation service business increased by 1.23 pct to 16.68%, but due to changes in the revenue structure, the overall gross margin increase was limited (the share of high-margin sanitation equipment declined). It is expected that in the future, as the share of new energy equipment in the equipment business gradually increases, there is still room for improvement in gross margin. Stock sanitation service projects will enter a period of stable operation, and the gradual highlighting of the results of refined management will also drive an increase in gross margin of sanitation services. In terms of the cost ratio, the company's expense ratio for the 2023 period was 15.36%, up 0.55pct year on year. Among them, the sales expense ratio remained flat, increasing 0.06pct to 6.29%, and the management expense ratio (including R&D expenses) increased by 0.72pct to 8.47%, and the absolute amount increased by 117 million yuan (of which wages and remuneration increased by 80 million yuan, up 24.6% year on year), and the financial expense ratio decreased by 0.23 pct to 0.60%. There is still room for improvement in the payout ratio. The company's revenue ratio in 2023 was 98.60%, up 0.85pct year on year, 2024Q1 fell to 85.80% year on year, and there is still room for improvement in the future.
We expect the continued promotion of sanitation services and the increase in the release of new energy sanitation equipment to drive improved performance. On January 30, 2023, eight departments including the Ministry of Industry and Information Technology issued the “Notice on Organizing and Launching Pilot Work in the Public Sector Vehicle Full Electrification Pilot Zone”, which proposes to “launch pilot work on a comprehensive electrification pilot zone for public sector vehicles nationwide”, requiring the proportion of new energy vehicles added and updated to the pilot field to reach 80%. The penetration rate of new energy sanitation equipment in 2023 is only about 8.4%, and the growth of new energy sanitation equipment is quite flexible in the future.
Net profit due to mother for 2024-2026 is estimated to be 695 million yuan, 8.11 million yuan, and 932 million yuan, respectively, corresponding to PE24x, 20x, and 18x, maintaining an “incremental” rating.
Risk warning
1. The sanitation marketization process is lower than expected;
2. The competitive pattern of new energy equipment has deteriorated.