Key points of investment

Incident: In the first three quarters of 2024, the company achieved operating income of 6.046 billion yuan, up 30.83% year on year; net profit to mother of 2.111 billion yuan, up 34.37% year on year; net profit after deducting non-return to mother of 2.033 billion yuan, up 33.17% year on year; weighted average ROE increased 2.02 pct year on year to 17.76% year on year.

2024Q1-3 saw a high increase in revenue performance and an increase in profit margins. 2024Q1-3's high revenue growth was mainly due to good operations, equipment, EPC and service business revenue, and increased project operating revenue.

2024Q1-3 has a gross sales margin of 47.64%, +0.50pct year on year, and a net sales margin of 35.98%, +1.38pct year over year. The 2024Q1-3 company's expenses increased 19.81% year over year to 0.484 billion yuan, and the cost ratio for the period decreased by 0.74 pct to 8.00% year on year. 2024Q3's revenue in a single quarter was 1.932 billion yuan, +11.82% YoY, -8.22% month-on-month, net profit 0.688 billion yuan, +26.24% YoY, -3.16% month-on-month, net net profit 0.681 billion yuan, YoY +26.35%, -0.33% month-on-month, gross sales margin 51.64%, YoY +6.29pct, net sales margin 37.03%, YoY +4.82pct.

2024Q1-3's net operating cash flow increased 32% at the same time, and the revenue ratio increased. 2024Q1-3 Company 1) Net cash flow from operating activities of 1.82 billion yuan, +31.69% year on year, revenue ratio +10.08pct; 2) Net cash flow from investment activities -2.092 billion yuan, compared with -1.741 billion yuan in the same period last year, of which 1.984 billion yuan was cash flow from the purchase and construction of fixed intangible and other long-term assets, +43.22% year on year; 3) Net cash flow from financing activities was 0.176 billion yuan, previous year Over the same period, it was -0.268 billion yuan.

The solid waste business is running steadily, the amount of 2024Q1-3 garbage disposal also increased by 13%, and green license transactions are being actively developed. The 2024Q3 Jiaohe and Longnan projects were put into trial operation. By the end of the third quarter of 2024, the company invested and controlled 55 waste incineration operations and trial operation projects (including 5 trial operations), with an operation scale of about 0.037 million tons/day, and 19 food waste treatment operations and trial operation projects (including 2 test runs). The garbage storage volume of the garbage disposal project controlled by 2024Q1-3 was 9.8167 million tons +12.79%, of which the domestic waste storage volume was 9.3189 million tons, +12.23% year over year, 2.68 billion degrees, +15.38% year over year, and 288 kilowatt per ton of feed-in electricity, +2.84% year on year.

The Yongqiang Food Waste Project and the Yongkang Phase I Technology Improvement Project are to be subsidized by 50 million yuan and 10.15 million yuan respectively. The Kunshan company completed the first green certificate transaction, selling a total of 0.0235 million units. By the end of the third quarter of 2024, the company had issued a total of about 3.41 million green certificates.

The equipment sector continues to develop new products, and orders for 2024Q3 equipment increased by 1.475 billion yuan, which exceeded the level of the first half of the year. 2024Q3, the company and its equipment manufacturing companies added a total of about 1.475 billion yuan in orders for major daily environmental protection and new materials and equipment. In the first three quarters of 2024, the company added a total of 2.688 billion yuan in equipment orders, supporting a high increase in the equipment business. Weiming Equipment Group has developed a new product filter to diversify the range.

High ice nickel has begun commissioning work, the electrolytic nickel project has entered trial production, and the new materials business is about to begin.

The first side blow furnace production line of the company's subsidiary Carman Company started the oven and carried out overall system debugging work; Weiming Shengqing Company's Wenzhou Lithium Battery New Material Project Phase I Electrolytic Nickel Project was officially put into trial production, and it is expected that the new materials business will usher in a scale-up period in 2025.

Profit forecast and investment rating: Solid waste operations are growing steadily, equipment orders continue to increase, and new materials projects are progressing smoothly and profits are about to be released. We maintain our 2024-2026 net profit forecast of 2.774/3.612/4.514 billion yuan, corresponding to 13/10/8 times PE, and maintain a “buy” rating.

Risk warning: Project progress falls short of expectations, policy risks, and increased industry competition.