Description of the event
High Energy Environment released its 2024 three-quarter report. Q1-3 achieved revenue of 11.45 billion yuan, an increase of 52.88% year on year; net profit to mother 0.561 billion yuan, a year-on-year decrease of 14.69%; net profit after deducting non-return to mother 0.465 billion yuan, a decrease of 19.0% year on year.
Among them, Q3 revenue was 3.905 billion yuan, up 29.25% year on year; net profit to mother was 0.145 billion yuan, down 11.23% year on year; net profit after deducting non-return to mother was 0.052 billion yuan, down 63.28% year on year.
Incident comments
In the first three quarters, it is estimated that revenue in the hazardous waste recycling sector increased rapidly, and the revenue from the engineering business was dragged down. In the third quarter, the company's revenue still maintained a 29.25% year-on-year growth rate. Referring to the business sector in the first half of the year: 1) Solid waste and hazardous waste resource utilization: revenue of 5.68 billion yuan, an increase of 129% over the previous year; among them, the Jiangxi Xinke project was fully put into operation in the first half of the year, and Chongqing Yaohui also completed technical upgrading in February, increasing production capacity utilization, while metal prices were high in the first half of the year; 2) Environmental operation services: revenue of 0.88 billion yuan, an increase of 9.1% over the previous year; waste incineration projects actively developed multiple businesses such as heating and steam supply on the basis of smooth operation ; 3) Environmental protection engineering: Revenue of 0.99 billion yuan, down 16.8% year on year, mainly due to delays in the company's control of the quality of tender projects and construction progress of some projects.
Profitability is under pressure. 2024Q3's net profit margin was 4.77%, down 0.34pct year on year; gross profit margin was 13.3%, down 1.08pct year on year (mainly driven by the environmental engineering sector); investment income of 0.048 billion yuan and fair value change profit and loss of 0.056 billion yuan (0.018 billion yuan and -0.04 billion yuan, respectively, in the same period last year); asset impairment losses were about 0.017 billion yuan, and credit impairment losses were about 0.017 billion yuan (for the same period last year, respectively - -0.001 billion yuan and -0.28 billion yuan).
Q3 Net cash flow from operating activities improved month-on-month. The net cash flow from operating activities in the first three quarters was 0.219 billion yuan, of which Q1-Q3 was 0.1 billion yuan, 0.01 billion yuan, and 0.109 billion yuan respectively. The large month-on-month decline in Q2 may be related to the increase in inventory of the company's Jinchang project and Xinke project. Production has not yet been converted into products to complete sales, and Q3 completed product shipments to return funds.
The capital expenditure for 2021-2023 was 1.98 billion yuan, 2.61 billion yuan, and 1.51 billion yuan respectively. Currently, there are few projects under construction, and future capital expenditure is expected to continue to decline.
Implement large mid-term dividends. The company plans to distribute a cash dividend of 0.33 yuan (tax included) to all shareholders. The total proposed cash dividend of 0.503 billion yuan (tax included) is calculated, and the semi-annual dividend ratio is about 120.91%.
Profit prediction and valuation: Hazardous waste recycling projects for high-energy environments in 2023 are still at a turning point. The Jiangxi Xinke, Chongqing Yaohui, and Gansu Jinchang projects all fell short of expectations at the beginning of operation and are undergoing continuous technical improvements; since 2024Q1, with the completion of the renovation of Jiangxi Xinke and Chongqing Yaohui, Jinchang Phase II has been put into operation; it is expected that the company's existing projects will gradually achieve stable profits in the future. The estimated net profit for 2024-2026 is 0.726 billion yuan, 0.841 billion yuan, and 0.952 billion yuan, corresponding to PE valuations of 10.8x, 9.4x, and 8.3x. Maintain a “buy” rating.
Risk warning
1. The operational stability of hazardous waste recycling projects falls short of the expected risk; 2. The risk that capacity utilization rate falls short of expectations due to low hazardous waste collection; 3. The risk of untimely repayment of accounts receivable.
Comment(0)
Reason For Report