1H24 revenue and profit were +5% year-on-year, maintaining a “buy” rating
Sanfeng Environmental released its semi-annual report. In 2024, H1 achieved revenue of 3.132 billion yuan (yoy +5.08%), net profit of 0.666 billion yuan (yoy +5.29%), deducting non-net profit of 0.662 billion yuan (yoy +9.18%). We expect the company's 2024-2026 EPS to be 0.74, 0.80, and 0.84 yuan respectively. Comparatively, the company's 24-year Wind unanimously expected an average PE value of 13.8 times. Considering that the Sanfeng environmental operating index industry is ahead, with strong profitability and plenty of room for overseas growth, the company was given 15.2 times PE in 24, with a target price of 11.25 yuan (previous value of 11.03 yuan), maintaining a “buy” rating.
Reduced government subsidies/depreciation of accounts receivable dragged down Q2 profits
Q2 Company achieved revenue of 1.579 billion yuan (yoy +10.11%, qoq +1.73%) and net profit of 0.276 billion yuan (yoy -2.34%, qoq -29.19%). The gross profit margin was 31.59% (yoy+1.43pp), and other income was 34.22 million yuan (1H23:61.14 million yuan), mainly due to a year-on-year decrease in government subsidies, with a credit impairment loss of 36.35 million yuan (1H23: recovery of 1.82 million yuan), mainly due to increased impairment of accounts receivable.
As of June 30, the company's accounts receivable were $2.383 billion, +21.69% YoY.
High-quality solid waste operation. The waste treatment volume of holding projects was +11%. By the end of the 2024 semi-year, the company had 51 waste incineration projects completed and put into operation, including 42/9 holding/shareholding projects, with a total design and treatment capacity of 0.0415/0.0159 million tons/day. The total waste disposal capacity of 24H1's holding project was 7.535 million tons, +10.6% year over year, total power generation capacity was 2.97 billion kilowatts, +9.78% year on year, and feed-in electricity was 2.62 billion degrees, +9.73% year over year. A total of 0.47 million tons of steam were sold, +32.2% year over year. 24H1's holding project has an average power generation capacity of 413.5 kilowatts of waste per ton (excluding heating units), and the average plant electricity consumption rate is 11.84% (excluding heating units), continuing to maintain the leading level in the industry. The company focuses on industrial chain collaboration. 24H1's projects disposed of a total of 0.0987 million tons of kitchen (food waste) waste, +216% compared to the same period, and 0.0572 million tons of sludge were disposed of, +44.44% over the same period last year.
Continuously optimizing the domestic and overseas market layout is expected to bring about performance breakthroughs
1H24 has completed and put into operation 3 waste incineration projects (2/1 with shareholding), 5 projects under construction, with a production capacity of 3,900 tons, including 4 holding projects, with a production capacity of 2,700 tons; the subsidiary Sanfeng New Power has signed 7 new heating contracts, which are expected to add about 0.61 million tons of annual heat supply; the subsidiary Sanfeng Technology has signed 13 new external market supply (EPC) contracts for sewage treatment and direct drinking water equipment, including 5 overseas supply contracts, with a total treatment scale of 4,210 tons/day; the company successfully signed 5 overseas supply contracts, with a total treatment scale of 4,210 tons/day; Continued The third round of licensing agreements was signed, and the number of technology licensing countries increased to 45, and exclusive technology licenses were obtained from many countries.
We believe that by continuously deepening domestic and international “two-wheel drive” market expansion strategies, the company explores upstream and downstream collaborative business and main business extension business in the industrial chain, which is expected to bring about breakthroughs in performance.
Risk warning: Electricity price subsidies have been reduced or abolished, the reimbursement of garbage disposal fees and power generation revenue falls short of expectations, and the scale of EPC construction revenue has declined sharply.