维持“增持”评级。根据建造业务进度，我们略下调公司2024-2026年预测净利润分别至42.00（原值44.67）、43.21（原值45.41）、44.56（原值46.20）亿港元，对应EPS 0.68、0.70、0.73 港元，我们重申，伴随自由现金流持续改善，公司分红或有望提升至更高水平，行业龙头有望迎来价值重估。Introduction to this report:
Net profit attributable to 2024H1 fell 12% year on year. The decline in performance was mainly due to lower capital expenditure and lower construction revenue. Free cash flow was corrected for the first time in recent years, and the mid-2024 cash dividend rate increased to 35%.
Key points of investment:
Maintain an “Overweight” rating. Based on the progress of the construction business, we slightly lowered the company's projected net profit for 2024-2026 to HK$42.00 (original value 44.67), 43.21 (original value 45.41), 44.56 (original value 46.20) billion, corresponding to EPS of HK$0.68, 0.70, and HK$0.73. We reaffirm that with the continuous improvement of free cash flow, the company's dividends may be expected to rise to a higher level, and industry leaders are expected to experience a revaluation.
The performance was in line with expectations. The company announced its 2024 interim results announcement. 2024H1 achieved revenue of HK$15.612 billion, down 4% year on year; attributable net profit of HK$2.454 billion, down 12% year on year. The decline in revenue was mainly due to lower capital expenditure, with construction revenue falling 13% to HK$3.584 billion compared to the same period in 2023; operating business remained steady, operating revenue was HK$9.459 billion, and the share of operating and financial revenue increased to 77%, and the quality of performance continued to improve.
The operation is steady, and the amount of garbage to be disposed of is growing steadily. 1) 2024H1 added 3,700 tons of waste incineration projects. By the end of 2024H1, the waste incineration project had put into operation 0.138 million tons, and 5,700 tons were under construction. 2) The amount of domestic waste treated in 2024H1 was about 25.98 million tons, up 9% year on year, and is still growing rapidly on a large base; heating gas supply increased 60% year on year, and the heating business is actively being developed. 3) The electricity consumption rate of the integrated plant is about 15%, the same as in the first half of 2023. 4) The average waste-to-energy project generates about 446 kilowatt-hours per ton entering the furnace, and the operating efficiency is good.
Free cash flow was corrected as scheduled, and the mid-2024 cash dividend rate increased to 35%. 1) We reaffirm that, on the one hand, there is a clear downward trend in the company's capital expenditure along with the reduction in construction and new projects; on the other hand, operating cash flow is growing steadily; the company's free cash flow is expected to improve at an accelerated pace. We judge that the company's dividend rate may be expected to rise to a higher level as free cash flow improves. 2) According to the company's management, 2024H1 achieved free cash flow of HK$0.97 billion, and free cash flow was corrected for the first time in the 2024 mid-term report. 3) The company plans to pay an interim dividend of 0.14 yuan this time, corresponding to a cash dividend rate of 35%, up from the mid-2023 cash dividend rate of 31%. Against the backdrop of overall profit falling due to fluctuations in the construction business, the total interim dividend is the same as the same period last year, which shows that the company values shareholder returns or has a more positive attitude, and future dividends can be expected to rise to a higher level.
Risk warning: National supplement recycling fell short of expectations, dividends fell short of expectations, and project operation fell short of expectations.
