Overall, the company's performance increased significantly. The company achieved revenue of 6.05 billion yuan (+30.8% YoY) and net profit to mother of 2.11 billion yuan (+34.4% YoY) in the first three quarters of 2024. In the third quarter of 2024, single-quarter revenue was 1.93 billion yuan (+11.8% YoY), and net profit to mother was 0.69 billion yuan (+26.2% YoY).

The increase in revenue was mainly due to the company's good operations, the increase in equipment, EPC and service business revenue, and project operating income. The increase in net profit to mother was mainly due to the increase in the company's operating income and good cost and expense management.

The gross margin remains stable, and the cost control effect is good. The company's gross margin for the first three quarters of 2024 was 47.6% (+0.5pct year over year), and the net profit margin to mother was 34.9% (+0.9pct). The company's sales expense ratio for the first three quarters of 2024 was 0.3% (+0.1pct), management expense ratio 3.0% (-0.4pct), financial expense ratio 3.3% (-0.2pct), total three expenses ratio 6.6% (-0.6pct), and the cost control ability was excellent. The company's net operating cash flow for the first three quarters of 2024 was 1.82 billion yuan, +31.7% year-on-year. The net operating cash flow improved significantly, mainly due to an increase in cash received from selling goods and providing services.

Waste incineration projects continue to contribute to stable cash flow, and green license transactions and government subsidies increase profit levels.

In the first three quarters of 2024, the garbage disposal projects controlled by the company completed a total of 9.817 million tons of garbage storage in the first three quarters, an increase of 12.8% over the previous year, and 2.68 billion degrees of feed-in electricity, an increase of 15.4% over the previous year. The second phase of the Yongkang project was officially put into operation, and the Jiaohe project and the Longnan project were put into trial operation. At the end of the period, the company invested and controlled 55 domestic waste incineration treatment operations and trial operation projects (including 5 in trial operation), which can provide sufficient cash flow guarantee for the company. In addition, the company has made positive progress in green certificate transactions. Kunshan Company completed the first green certificate transaction, selling a total of 0.0235 million units. At the end of the reporting period, the company and its subsidiaries obtained a total of about 3.41 million green certificates. At the same time, the Yongqiang Food Waste Project and Yongkang Phase 1 bid upgrade project plan to receive a total subsidy of 60.15 million yuan to further help improve performance.

The equipment business has signed new orders at a remarkable rate, continues to be rich in variety, and the growth momentum is strong. The company maintained rapid development in the field of equipment manufacturing. In the third quarter of 2024, the company and its equipment manufacturing companies added orders for major daily environmental protection and new materials and equipment totaling about 1.48 billion yuan, a sharp increase of 74.6% over the previous year. In addition, Weiming Equipment Group is developing a new product filter and carrying out the second phase of the PV project at the Dushan base, which is expected to bring room for incremental growth for the company.

The new energy materials project is progressing steadily, and production capacity is about to be released. During the reporting period, the first side blow furnace production line of the company's subsidiary Carman Company started the oven and carried out overall system debugging work. The first phase of the Wenzhou Lithium Battery New Material Project Electrolytic Nickel Project of Shengqing Company, a subsidiary of the company, was officially put into trial production. With the gradual implementation of the project, the company's production capacity in the field of new energy materials is expected to be released, contributing new profit growth points to the company.

Investment advice: As a leader in private waste incineration, the company has excellent profitability. Ongoing projects fully support performance growth, and new energy projects are expected to open up room for incremental performance. We expect the company's 2024-2026 net profit to be 2.81/3.56/4.27 billion yuan, EPS 1.7/2.1/2.5 yuan respectively, and the corresponding PE is 12.9X/10.2X/8.5X, respectively, maintaining a “buy” rating.

Risk warning: Waste incineration policy risks, increased operating costs, and project progress falling short of expectations.