New orders for clean energy equipment were +83% year over year, and the performance release is expected. The company is expected to achieve net revenue/return profit of 18.9.5/1.03 billion yuan in 2023, +12.94%/-30.07% YoY (adjusted caliber). In 1Q24, the company's revenue/net profit to mother was -4%/-37.1% YoY to $44.5/310 million yuan. In 2023, the company signed a new clean energy equipment order of 2 billion yuan, +83% over the same period last year. The clean energy equipment sector's performance release can be expected. To reduce the revenue and gross profit margin of the company's hazardous waste disposal and recycling products sector, we expect the company's net profit to be worth 15/17/1.9 billion yuan in 2024-2026 (previous value: 21/23 billion yuan). Referring to the comparable company Wind, the average 2024E PE is expected to be 10.8x. Considering that the future growth rate of the company's clean energy equipment sector is faster and the gross margin is relatively stable, the company was given 13.5 x 2024 EPE with a target price of 3.86 yuan (previous value: 4.98 yuan), maintaining a “buy” rating.
In 2023, revenue from hazardous waste disposal and recycling was +13.5%, gross margin was 4.4pp. year on year, the company's revenue of clean energy equipment/oil extraction/hazardous waste disposal and resource products was +5.91%/-26.36%/+13.5% to 8.8/0.19/ 180 billion yuan, with gross margin of -1.07/-15.05/-4.39pp to 39.99%/-7.6%/11.5%, respectively. The oil extraction business accounts for less than 1% of the company's revenue, which has little impact on overall performance. In 2023, the net profit of the subsidiaries Zhejiang Fu Hydropower/Huadu Nuclear Equipment/Shenlian Environmental Protection was 0.94 billion 0.88/ 914 million yuan respectively, of which the net profit of Shenlian Environmental Protection accounted for 89% of the company's overall net profit. The company's net operating cash flow in 2023 was +209.02% year-on-year to 1.28 billion yuan, mainly affected by increased sales payments received and a year-on-year increase in net income and expenditure on hedging guarantees.
1Q24 The company's financial expenses were -65.2% year-on-year, and other income was +120.6% YoY in 1Q24, and the company's financial expenses were -65.24% to 0.23 million yuan, mainly due to the year-on-year decrease in current interest expenses; the company's other income was 110 million yuan, +120.63%, mainly due to the year-on-year increase in VAT credits received in the current period; however, the reduction in liquidation income generated by hedging instruments in the company's hedging business led to the company's investment income of -0.79 million yuan, -159.37% year-on-year. The company accrued asset impairment losses of RMB 15 million in 1Q24, mainly due to price reduction and impairment preparations for inventory withdrawals. In 1Q24, although the company's operating cash flow was -240 million yuan, the year-on-year improvement was 39.03%. The company has sufficient orders for clean energy equipment. New orders for hydropower/nuclear power equipment were signed in 2023. In particular, new orders for nuclear power were +375% compared to the same period last year. Subsequent releases of the company's clean energy equipment sector can be expected.
Risk warning: The recovery in the volume and price of hazardous waste fell short of expectations; inventory and goodwill depreciated; the nuclear power/pumped storage construction cycle was lagging behind; the clean energy equipment competition pattern worsened, and company orders or profits fell short of expectations.