Target price 25.05 yuan, maintain the "buy" rating

Wang Neng Environment released three quarterly reports that in 2023, Q1-Q3 realized revenue of 2.4 billion yuan (yoy+3.06%), net profit of 517 million yuan (yoy-4.35%) and deduction of 508 million yuan (yoy+0.88%) of non-net profit. Among them, Q3 realized revenue of 860 million yuan (yoy-0.43%,qoq+27.46%) and net profit of 165 million yuan (yoy-19.49%,qoq-11.60%). We downgrade the revenue and gross profit margin forecasts for kitchen waste disposal and lithium battery recycling business, and estimate that the company's EPS in 2023-2025 will be 1.67,1.90,2.21 yuan respectively (the previous value is 1.91,2.19,2.57 yuan in 2023-2025). Comparable company's 23-year Wind unanimously expected the average PE to be 15.0 times, giving the company 15.0 times PE for 23 years, with a target price of 25.05 yuan (the previous value was 29.8 yuan) and maintaining a "buy" rating.

The revenue of domestic waste grew steadily, and the revenue of lithium battery recycling dropped 31% compared with the same period last year. In the first three quarters, the revenue of domestic waste disposal was 1.73 billion yuan, accounting for 71.9%, and + 7.0% compared with the same period last year. The revenue of kitchen waste disposal was 297 million yuan, accounting for 12.4%, and-0.6%, respectively. The revenue from the construction of the bot project was 173 million yuan, accounting for 7.2% and-16.4%, respectively. Lithium battery reuse realized revenue of 110 million yuan, accounting for 4.6% of revenue,-31.3% of the same period last year; recycled rubber achieved revenue of 71.6 million yuan, accounting for 3.0% of revenue, compared with 5.39 million yuan of revenue in the same period last year, + 1227% of the same period last year. In terms of operating data, in the first three quarters, the company completed 6.48 million tons of domestic waste (+ 8% year-on-year), 1.83 billion degrees of online electricity (+ 2% year-on-year), 19000 tons of cooking oil (+ 22% year-on-year) and 706000 tons of heat supply (+ 2% year-on-year).

Cash flow has improved significantly, and active dividends are expected to be revalued.

In the first three quarters, the net cash flow of the company's operating activities was 820 million yuan, + 27% of the same period last year, and the net cash flow of investment activities was 810 million yuan,-36% of the same period last year. The cash flow situation significantly improved, providing a good basis for the return of shareholders. The board of directors proposed a profit distribution plan for the first three quarters of 2023: a cash dividend of 22 yuan (including tax) for every 10 shares, with a total cash distribution of 85.9 million yuan, accounting for 16.6% of the net profit returned to the mother in the first three quarters. The amount of cash dividend (including tax) for the company in 20-22 years is 215 million yuan, respectively, and the cash dividend ratio is 30%, respectively. The company has obvious advantages in operating assets and continues to pay dividends back to shareholders, and we think it is expected to get a revaluation.

Risk tips: waste incineration project operational risk, lithium recycling market competition intensified, recycled rubber project profitability is not as expected.