Fukuyama Phase II consolidation confirmed depreciation costs, causing 1H24 profit to decline, and Yongxing Co., Ltd. issued a semi-annual report. In 2024, H1 achieved revenue of 1.834 billion yuan (yoy +3.86%), net profit to mother of 0.422 billion yuan (yoy -6.96%), deducting non-net profit of 0.4 billion yuan (yoy -4.82%). Among them, Q2 achieved revenue of 0.905 billion yuan (yoy +2.24%, qoq -2.46%) and net profit of 0.218 billion yuan (yoy -4.70%, qoq +7.31%). The main reason for the decline in 1H24 net profit due to the restructuring of the Fukuyama Phase II project in mid-2023. 1H23 does not include depreciation costs and therefore has a high profit base. 2H24 will no longer have the high base impact of not being consolidated. We expect the company's 2024-2026 EPS to be 0.90, 1.03, and 1.14 yuan respectively. Comparatively, the company's 25-year Wind unanimously expected an average PE value of 10.6 times. Considering that the company's 2024-26 profit CAGR was 12% ahead of its peers, the company was given 15.9 times PE in 25, corresponding to a target price of 16.38 yuan, maintaining a “buy” rating.
Gross margin -6.76pp year-on-year, operating cash flow +8.83%
The overall gross margin of 1H24 reached 42.68%, year-on-year - 6.76pp, mainly due to the restructuring of the Fukuyama Phase II project, increased asset depreciation and amortization; sales expenses were 0.062 million yuan, -95.88% year over year, mainly due to sales business restructuring; net cash flow from operating activities reached 0.908 billion yuan, +8.83% year over year; cash flow from investment activities - 0.391 billion yuan (1H23: -1.441 billion yuan), mainly due to the acquisition of participating companies in the previous period Equities have entered a period of steady operation in the current period, and cash payments for the purchase and construction of long-term assets have decreased.
The regional advantage is stable. The planned production capacity for waste incineration power generation is 32,090 tons/day. According to the company's 2024 mid-year report, the company has already put into operation all 14 waste incineration power generation projects, located in Guangzhou, Leizhou, Shaodong, etc., with a total design capacity of 32,090 tons/day. 1H24 garbage disposal capacity was 4.1756 million tons, +8.31% year-on-year, total waste incineration power generation was 2.37 billion kilowatts, +5.33% year-on-year, and feed-in electricity volume 2.015 billion degrees, +5.23% year-on-year. The company wholly operates 4 biomass treatment projects, all located in Guangzhou, providing biomass (biomass waste such as food waste, food waste, dead livestock, etc.) treatment services. The 1H24 project treated 0.3665 million tons of waste, +34.99% over the same period last year. The company is responsible for investing in construction and operation of the Guangzhou Waste Incineration Power Generation Project. The regional competitive advantage is obvious, and it has a certain influence in the industry.
Risk warning: changes in the electricity price subsidy policy, the risk of recovering accounts receivable, and the mixing of old garbage falls short of expectations.