Core views

2024H1 achieved revenue of 1.834 billion yuan, up 3.86% year on year; net profit to mother was 0.422 billion yuan, a decrease of 6.96% year on year. The company's revenue scale increased year-on-year, mainly due to the year-on-year increase in the capacity utilization rate of the company's waste incineration power generation projects, and the year-on-year increase in the scale of garbage disposal and feed-in electricity. In the first half of 2024, the company's waste incineration power generation project treated 4.1756 million tons of waste, an increase of 8.31% over the previous year; achieved a total power generation of 23.7 billion degrees, an increase of 5.33% over the previous year; and achieved 2.015 billion feed-in electricity, an increase of 5.23% over the previous year.

The company's net profit for the current period declined year-on-year, mainly due to the company's new waste incineration project being put into operation and transferred to fixed assets in 2023Q3. As a result, the fixed asset base for the current period was higher than the same period last year, and the impact of the year-on-year increase in discounted expenses. As of the end of June 2024, the company's fixed assets were 12.5 billion yuan, 13.19% higher than the same period last year. Considering the company's dividend promise and steady growth in operating project revenue, we expect the company's dividend scale to increase steadily to ensure steady income for investors.

occurrences

Company releases 2024 semi-annual report

2024H1 achieved operating income of 1.834 billion yuan, a year-on-year increase of 3.86%; net profit to mother of 0.422 billion yuan, a year-on-year decrease of 6.96%; deducted net profit of 0.4 billion yuan, a year-on-year decrease of 4.82%; achieved a weighted return on net assets of 4.30%, a year-on-year decrease of 1.19 percentage points; and achieved basic earnings per share of 0.48 yuan/share, a year-on-year decrease of 20.00%. Looking at a single quarter, the company achieved net profit of 0.218 billion yuan, a year-on-year decrease of 4.70%.

Brief review

The scale of revenue continued to grow steadily, and the project reduced current profit of 2024H1. The company achieved operating income of 1.834 billion yuan, an increase of 3.86% year on year; net profit to mother was 0.422 billion yuan, a decrease of 6.96% year on year. The company's revenue scale increased year-on-year, mainly due to the year-on-year increase in the capacity utilization rate of the company's waste incineration power generation projects, and the year-on-year increase in the scale of garbage disposal and feed-in electricity. In the first half of 2024, the company's waste incineration power generation project treated 4.1756 million tons of waste, an increase of 8.31% over the previous year; achieved a total power generation of 23.7 billion degrees, an increase of 5.33% over the previous year; and achieved 2.015 billion feed-in electricity, an increase of 5.23% over the previous year.

The company's net profit for the current period declined year-on-year, mainly due to the company's new waste incineration project being put into operation and transferred to fixed assets in 2023Q3. As a result, the fixed asset base for the current period was higher than the same period last year, and the impact of the year-on-year increase in discounted expenses. As of the end of June 2024, the company's fixed assets were 12.5 billion yuan, 13.19% higher than the same period last year. In terms of the period expense ratio, 2024H1 company's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 0.003%, 7.91%, 3.93%, and 9.67%, respectively, with year-on-year changes of -0.08, -0.97, +0.57, and -0.82 percentage points. In terms of cash flow, in the first half of 2024, net cash flows from the company's operating activities, investment activities, and financing activities were $908, -3.91, and 896 million yuan, respectively, with year-on-year increases of $74, 10.50, and $1,777 million. The reduction in the company's investment cash flow expenses was mainly due to a decrease in cash payments to purchase long-term assets after entering a period of stable operation; the year-on-year increase in financing cash flow was mainly due to funds raised by IPO during the current period.

Capacity utilization increased year-on-year, and tons of waste-to-energy generation remained high

Currently, the company holds 14 waste incineration power generation projects, all of which have been put into operation, with a total design and treatment capacity of 32090 tons/day. In the first half of 2024, the company's project treated 4.1756 million tons of garbage, an increase of 8.31% over the previous year; the equivalent capacity utilization rate was 71.30% (waste treatment capacity/ (design treatment capacity × 6 ÷ 12));

The year-on-year increase was 5.47 percentage points; the total amount of electricity generated was 2.37 billion degrees, an increase of 5.33% over the previous year; the equivalent amount of waste-to-energy generation was 5.6758 million kilowatt-hours, a slight decrease of 3.08% over the previous year, and still maintained a high level of tonnage generation. In addition, the company wholly operated 4 biomass treatment projects, providing biomass (food waste, food waste, biomass waste such as dead livestock, faeces, etc.) treatment services, with a design treatment capacity of 2590 tons/day; in 2024, 36.0.05 million tons of garbage were treated, up 34.99% year on year; equivalent capacity utilization rate of 77.54%, an increase of 20.10 percentage points over the previous year.

The scale of dividends is expected to increase steadily. Maintaining the “buy” rating, the company's garbage disposal projects have all been put into operation. Along with the increase in capacity utilization, the company's profitability is expected to grow steadily. In July 2023, the company issued the “Proposal on the 2023-2025 Profit Distribution Plan”, which stipulates that the total profit distribution for a single year 2023-2025 is not less than 60% of the distributable profit achieved in the current year when the profit distribution conditions of relevant laws and regulations and the company's articles of association are met. Considering the company's dividend promise and steady growth in operating project revenue, we expect the company's dividend scale to increase steadily to ensure steady income for investors. We expect the company's net profit from 2024 to 2026 to be 0.838 billion yuan, 0.992 billion yuan, and 1.087 billion yuan, respectively, corresponding EPS of 1.12 yuan/share, 1.32 yuan/share, and 1.45 yuan/share, respectively.

Risk analysis

Risk that the capacity utilization rate will fall short of expectations: Currently, there is still room for growth in the capacity utilization rate of the company's waste incineration project. If the capacity utilization rate of the waste incineration project falls short of expectations due to a decrease in incremental waste or insufficient mixing of solid waste, then the increase in the company's business performance may be reduced. Assuming that the company's capacity utilization rate in 2024 falls by 1%, 3%, and 5%, respectively, the company's net profit to mother will decrease by 1844.53, 5533.58, and 92.263 million yuan, by 2.06%, 6.19%, and 10.32%, respectively.

The risk of falling garbage disposal prices; the price of the company's garbage disposal project needs to be approved regularly. If the unit price of garbage disposal falls due to government financial or policy-oriented issues, the company's profit growth may fall short of expectations.

Risk of changes in preferential tax policies: Currently, the company enjoys preferential policies in terms of value-added tax, corporate income tax, etc. If subsequent preferential policies expire or change, the company's tax expenses will increase, and the growth in business performance may fall short of expectations.