A waste incineration power generation company under the Chinese Science and Technology Group. The actual controller is the Chinese Academy of Sciences. Zhongke Environmental Protection was founded in 2012 by Zhongke Industrial Group in conjunction with other shareholders, and completed its IPO listing in 2022. As of the 2024 three-quarter report, the company's largest shareholder is Zhongke Industrial Group, which holds 57.75% of the company's shares. The actual controller of the company is the Chinese Academy of Sciences.

Zhongke Industrial Group is a large high-tech industry investment group under the Chinese Academy of Sciences Holdings Co., Ltd. (Guoke Holdings for short, the Chinese Academy of Sciences holds 100%), focusing on the development of rare earth permanent magnet materials and environmental protection industries. It has 2 listed companies, namely Zhongke Sanhuan (which specializes in R&D, production and sales of rare earth magnetic materials and their application products) and Zhongke Environmental Protection (responsible for comprehensive waste treatment and disposal services), with total assets of nearly 20 billion yuan and annual revenue of nearly 12 billion yuan.

The company has successively issued equity incentives and dividend promises, which fully reflects the company's confidence in development. Recently, the company announced plans to grant 28.816 million shares of restricted shares to key employees at a price of 2.41 yuan/share; of these, 293 people were awarded for the first time, with a performance assessment target of 15%, 25%, and 40% increase in annual net profit for 2024-2026 compared to 2023, respectively; in October 2024, the company announced a five-year dividend commitment, planning an annual cash dividend ratio of not less than 60% for 2024-2028. The five-year high dividend plan fully reflects the company's commitment to Confidence in future development and emphasis on shareholder returns.

The company is mainly engaged in waste incineration power generation business, and actively expands heating to bring about continuous profitable growth. The operating scale of the company's waste incineration power generation continued to increase in 2018-2023. By the end of 2023, the company had an operating scale of 10,500 tons/day and 5,450 tons/day of projects under construction and preparation. The projects are mainly distributed in Zhejiang, Sichuan, Guangxi, Shanxi, Liaoning, Hebei, etc., and it is expected that the projects under construction will be put into operation in the next two years.

In addition, in response to the impact of the decline in national subsidies, the company actively expanded heating and achieved 1.12 million tons of heat supply in 2023, which is at the forefront of the industry. According to estimates, compared to power generation, 1 ton of waste incineration heating can bring a net profit increase of 210-230 yuan. The company's current heating projects include Cixi, Ningbo and Shijiazhuang, and there is great potential for subsequent heating transformation, which is expected to bring continued profit growth to the company. As of the 2024 semi-annual report, the company has signed a total of 11 heating intention agreements. After all of the intention agreements are implemented, it is expected to add more than 0.75 million tons of annual heating capacity to the current level.

Profit forecast and rating: We expect the company's revenue in 2024-2026 to be 1.38, 1.86, and 1.97 billion yuan, respectively, with year-on-year growth rates of -1.7%, 34.4%, and 6.3%, respectively, and realized net profit of 0.33, 0.38, and 0.46 billion yuan, respectively, with year-on-year growth rates of 22.8%, 14.6%, and 21.1%. The PE corresponding to the current stock price is 24, 21, and 17 times, respectively. Considering future growth, coverage for the first time will be given a “gain” rating.

Risk warning. 1) The commissioning progress of new projects falls short of expectations; 2) Competition for heating has intensified, causing the heating scale to expand less than expected; 3) Risk of falling heating prices