1H24's net profit to mother was -35.2% year-on-year. Clean energy equipment performance is yet to be released. The company's 1H24 achieved revenue/net profit to mother of 10.31/0.485 billion yuan, +10.2%/-35.2% year-on-year.

In 2Q24, the company's revenue/net profit to mother was +24.2%/-31.5% YoY to 5.856/0.174 billion yuan. 1H24, the company signed a new hydropower/nuclear power business order of 1.25/0.103 billion yuan. Considering the 5-6 year construction period for hydropower/nuclear power, the company's clean energy equipment sector performance can be expected to be released. Considering the intensification of competition in the hazardous waste disposal and recycling industry and lowering the company's gross profit margin in the hazardous waste disposal and recycling products sector, we expect the company's net profit to mother of 1.067/1.219/1.339 billion yuan (previous value: 1.499/1.7/1.871 billion yuan) in 2024-2026. Referring to the comparable company Wind, the average value of 2024E PE is 8.9x. Considering that the future performance growth rate of the company's clean energy equipment sector and nuclear power equipment with high profit margins will gradually increase, the company will be given 15.5x 2024E PE with a target price of 3.17 yuan (previous value: 3.86 yuan), maintaining the “buy” rating.

1H24 hazardous waste disposal and recycling revenue +9.85% year over year, gross margin -3.32pp1H24, the company's revenue from clean energy equipment/oil extraction/hazardous waste disposal and recycling products +20.09%/-3.92%/+9.85% to 0.449 billion yuan/9.167 million/9.828 billion yuan, of which gross margin of clean energy equipment/hazardous waste disposal and recycling products was -0.44/ -3.32pp to 37.55%, respectively 9.91% In 1H24, the net profit of the subsidiaries Zhejiang Fu Hydropower/Huadu Nuclear Equipment/Shenlian Environmental Protection was 0.047/0.03/0.459 billion yuan respectively, of which the net profit of Shenlian Environmental Protection accounted for 93.3% of the company's overall net profit. On 1H24, the company signed a new hydropower/nuclear power business order of 1.25/0.103 billion yuan. The company's clean energy equipment sector is expected to benefit from the normalization of nuclear power approval and accelerated construction of savings in the future.

1H24 financial expenses continued to decline. Other income was +44.53% 1H24, and the company's financial expenses were -34.75% to 0.046 billion yuan, mainly due to a year-on-year decrease in current interest expenses; the company's other income was 0.194 billion yuan, +14.19% year over year, mainly due to current amortization of profitable government subsidies, asset-related government subsidies received by the company, current amortization of value-added tax credits, etc. The company's 1H24 accrued asset impairment losses of 0.057 billion yuan, mainly due to reduced inventory prices and depreciation of contract assets.

At 1H24, the company's operating cash flow was -0.083 billion yuan, -125.22% year over year. We believe it was mainly due to a year-on-year decrease of 0.262 billion yuan in net profit.

Risk warning: The recovery in hazardous waste volume and price falls short of expectations; inventory and goodwill impairment; the nuclear power/pumped storage construction cycle is lagging behind, and the competitive pattern of clean energy equipment worsens, and company orders or profits fall short of expectations.