1H24 net profit to mother +3.30% YoY

Wangneng Environmental released its semi-annual report. In 2024, H1 achieved revenue of 1.59 billion yuan (yoy +3.25%), net profit of 0.363 billion yuan (yoy +3.30%), deducting non-net profit of 0.366 billion yuan (yoy +6.03%). Among them, Q2 achieved revenue of 0.804 billion yuan (yoy +19.06%, qoq +2.19%) and net profit of 0.181 billion yuan (yoy -3.16%, qoq -0.06%). The proposed discovery bonus is 0.086 billion yuan, corresponding to DPS of 0.2 yuan, with a dividend ratio of 23.7%. Maintaining the profit forecast, we expect the company's 2024-2026 EPS to be 1.66, 1.86, and 2.01 yuan, respectively. Comparatively, the company Wind agreed to expect an average PE value of 10.9 times in 24, giving the company 10.9 times PE in 24, with a target price of 18.09 yuan (previous value of 18.59 yuan), maintaining a “buy” rating.

Domestic waste operating revenue was +15% year-on-year, actively promoting price adjustments and green license trading 1H24's domestic waste operating revenue of 1.21 billion yuan (yoy +15.49%), accounting for 76.1% of revenue and 48.04% (yoy -3.71%). The 1H24 Dingxi 700-ton project was officially put into operation. As of June 30, '24, the production capacity for waste incineration was 22,920 tons, of which 21,920 tons were put into operation and 1,000 tons in trial operation (South Taihu Lake Phase V). In the first half of the year, the company completed 1.453/1.24 billion kilowatts of feed-in electricity, an average feed-in price of 0.52 yuan/kilowatt (excluding tax), and 4.4523 million tons of garbage stored. In the first half of the year, 8 project companies were applying for garbage subsidy and price adjustments. On February 19, the first phase of the South Taihu Lake Domestic Waste Incineration Power Generation Project successfully applied for a green license and was listed for trading.

Food waste operating income +15% YoY

1H24's food waste operating revenue was 0.198 billion yuan (yoy +15.18%), accounting for 12.45% revenue and 32.66% gross profit margin (yoy+2.30pp). As of June 30, there was a production capacity of 3,520 tons of hand-cooked food waste treatment, of which 2810/510/200 tons were in operation/construction/preparation for construction. In May 2024, the company won the bid for the Macau Organic Resource Recycling Center as a member of the consortium. The project is an EPC+O (general contract+operation) model, with a daily treatment scale of 150 tons of food waste, 230 cubic meters of toilet wastewater, and 190 cubic meters of grease wastewater.

The decline in revenue from lithium battery recycling and rubber recycling

1H24's lithium battery cycle achieved revenue of 34.39 million yuan (yoy -57.98%), accounting for 2.2% of revenue. To cope with the impact of price fluctuations, the lithium battery recycling business continued to adopt a production model with less self-production and multi-generation processing. In the first half of 2024, Lixin New Materials Co., Ltd. produced a total of 777.46 gold tons of cobalt, nickel, and lithium. Rubber recycling achieved revenue of 31.02 million yuan (yoy -20.69%). In the first half of 2024, Nantong's pullback production was 14,969 tons, and sales volume was 14,592 tons.

Risk warning: Increased competition in the lithium battery recycling market and the risk of fluctuating battery raw material prices.