On 4 December, Wangneng Environment (Wangneng) repurchased 218.2k shares (or 0.05% of the total share capital) in continued efforts and has outlined a three-year shareholder return plan. In addition, all of its waste-to-energy (WTE) projects have commenced full operation or trial runs, which we believe should continue improving its waste processing capacity/heat supply and drive waste treatment fee adjustments, thus increasing its cash flow. Based on this and strides in overseas expansion, we are upbeat on Wangneng’s earnings and cash flow performance for 2025-2026. Maintain BUY.

　　12月4日，旺能环境回购公司股份21.82万股，占公司目前总股本的0.05%。公司持续推动回购、制定三年股东回报规划。垃圾焚烧项目已全部投运或试运行，预计未来可持续提升垃圾处理量和供热量，推动垃圾处理费调价，现金流有望持续提升，同时出海取得突破。看好业绩和现金流表现，维持“买入”评级。
　　积极回购股份，展现发展信心
　　根据11月28日公告，公司拟回购金额1.00-2.00亿元，按照回购价格上限测算回购股份数量约455-909万股，占公司总股本比例1.07-2.13%。回购期限为自董事会审议通过回购股份方案之日起不超过12个月内，回购股份用途为股权激励计划、员工持股计划或可转换公司债券转股。12月4日，公司首次通过回购专用证券账户以集中竞价交易方式回购公司股份218,200股，占公司目前总股本的0.05%，最高成交价为15.53元/股，最低成交价为15.36元/股，成交总金额为人民币3,365,060元（不含交易费用等）。
　　持续提质增效，拓展收入来源
　　1）截至2024年中期，公司下属子公司中有8家公司正在申请垃圾补贴费调价。2）公司积极开拓供热市场，14个项目在发电的同时实现对外供热，2024年前三季度累计供热量86.21万吨。3）拓展炉渣、飞灰资源化等协同处置项目，增加收益。截止2024年中期，汕头、铜仁、淮北和荆州4个炉渣资源化项目已投产，合计日处理量2,300吨；湖州氢氧熔融项目、舟山富氧飞灰项目、丽水富氧飞灰项目正积极推进中，汕头纸膜造粒项目已取得项目备案、环评批复等前期文件。
　　维持盈利预测，目标价18.87元
　　维持盈利预测，我们预计2024-2026年归母净利润为6.33/7.24/7.74亿元，公司注销回购股份致EPS小幅提升至1.48/1.70/1.82元（前值1.47/1.69/1.80元）。可比公司2025年Wind一致预期PE均值为11.1倍（前值10.9倍），给予公司2025年11.1倍目标PE，对应目标价18.87元（前值18.42元）。
　　风险提示：回款低于预期，锂电回收市场竞争加剧，橡胶再生业务客户拓展不及预期。

Wangneng Environment’s 3Q24 revenue was RMB839m (-2.51% yoy, +4.42% qoq), with attributable net profit (NP) of RMB150mn (-9.14% yoy, -17.45% qoq), below our prior estimate of RMB174-190mn, mainly due to decreased revenue /GPM for lithium-ion battery (LIB) recycling. For 9M24, revenue/attributable NP/ recurring NP were RMB2,429/512/523mn (+1.19/-0.67/+3.06% yoy). All of the company’s waste-to-energy (WTE) projects have commenced operation or trial operation, set to continue improving its cash flow, in our view. Besides, the company has been making strides in overseas expansion. Maintain BUY.
Operating cash flow rose 36% yoy
For 9M24, the company’s net operating cash inflow was RMB1,115mn, up 36.14% yoy, with capex of RMB597mn (-20.28% yoy); accounts receivable rose 9.13% yoy to RMB1,217mn, and the debt-to-asset ratio fell 1.59pp yoy to 53.68%. Free cash flow was RMB256mn for 2023, turning positive for the first time, while the figure came to RMB518mn for 9M24. With implementation of the local government debt resolution policy and a trend towards user charges, we expect the company’s cash flow to further rise going forward, laying a solid foundation for raising dividends and rewarding shareholders.
Household waste treatment revenue rose 9% yoy
Revenues from household waste treatment/kitchen waste treatment/BOT project construction/LIB recycling/rubber recycling were RMB1,874/328/65/48/83mn for 9M24 (+8.57/+10.42/-62.12/-56.29/+15.35% yoy). In 9M24, the company handled 6,749 tonnes of waste and generated 1.92bn kWh of on-grid electricity. Solid waste treatment contributed 91% of revenue, set to provide stable, sustained profits and cash inflows, in our view.
Signed c. RMB394mn of EPC contracts with Thailand clients
On 26 September, the company signed four contracts in total with Siam Power Nongsarai and Siam Power Naklang, under which the company is to provide equipment design, installation, and testing services for two 9.9MW residential WTE plants, one in Nongsarai and another in Naklang, Thailand, with a total contract value of c. RMB394mn. These agreements mark the company’s first batch of EPC contracts signed overseas, signifying key progress in global expansion.
Lowering earnings forecasts, target price of RMB18.42
Given rising costs of household waste treatment and intensified competition in LIB recycling, we cut our GPM estimates for the above segments. We project the company’s 2024/2025/2026 attributable NP at RMB633/724/774mn (previous: RMB711/798/865mn). We value the stock at 10.9x 2025E PE, at par with its peers’ average on Wind consensus. Our target price is RMB18.42 (previous: RMB18.09).
Risks: lower sales collection than we expect; fierce competition in LIB recycling; customer acquisition for the rubber recycling business missing our expectations.

　　旺能环境发布三季报：Q3实现营收8.39亿元（yoy-2.51%，qoq+4.42%），归母净利1.50亿元（yoy-9.14%，qoq-17.45%），低于我们预期（预期1.74-1.90亿元），主要系锂电回收营收和毛利率下滑所致。2024年Q1-Q3实现营收24.29亿元（yoy+1.19%），归母净利5.12亿元（yoy-0.67%），扣非净利5.23亿元（yoy+3.06%）。公司垃圾焚烧项目已全部投运或试运行，现金流有望持续提升，出海取得突破。维持“买入”评级。
　　经营现金流同比+36%
　　前三季度公司经营活动现金流净流入11.15亿元，同比+36.14%，资本开支5.97亿元，同比-20.28%；应收账款同比+9.13%至12.17亿元，资产负债率53.68%，同比-1.59pct。2023年公司实现自由现金流2.56亿元，历史首次转正，9M24达到5.18亿元。化债政策和使用者付费趋势下，公司未来现金流有望进一步增长，为提升分红和回报股东打造坚实基础。
　　生活垃圾处置营收同比+9%，锂电回收营收同比-56%
　　前三季度公司生活垃圾处置实现营收18.74亿元，同比+8.57%；餐厨垃圾处置实现营收3.28亿元，同比+10.42%；BOT项目建造实现营收0.65亿元，同比-62.12%；锂电池再利用实现营收0.48亿元，同比-56.29%；再生橡胶实现营收0.83亿元，同比+15.35%。前三季度公司完成垃圾入库量674.90万吨，上网电量19.20亿度。固废处置收入占比达到91%，有望贡献持续、稳定的利润和现金流入。
　　签署泰国总包合同，总金额约人民币3.94亿元
　　9月26日，公司与SiamPowerNongsarai、SiamPowerNaklang签署4份合同，旺能为泰国呵叻府Nongsarai9.9MW和Naklang9.9MW两座生活垃圾焚烧发电厂提供设备设计、安装、调试等服务，合同金额合计约人民币3.94亿元。本次协议为旺能在海外签署的首批总包项目合同，全球化布局取得重要进展。
　　下调盈利预测，目标价18.42元
　　考虑生活垃圾处理成本上升、锂电回收竞争加剧，下调生活垃圾处理、锂电回收毛利率预测，我们预计2024-2026年归母净利润为6.33/7.24/7.74亿元（前值：7.11/7.98/8.65亿元）。可比公司2025年Wind一致预期PE均值为10.9倍，给予公司2025年10.9倍PE，对应目标价18.42元（前值：18.09元）。
　　风险提示：回款低于预期，锂电回收市场竞争加剧，橡胶再生业务客户拓展不及预期。

Wangneng Environment’s 1H24 revenue/attributable net profit (NP)/recurring NP were RMB1,590/363/366mn (+3.25/+3.30/+6.03% yoy). For 2Q24, revenue/ attributable NP were RMB804mn/181mn (+19.06/-3.16% yoy, +2.19/-0.06% qoq). The company plans to distribute a cash dividend of RMB86mn, with a DPS of RMB0.20 and a payout ratio of 23.7%. We maintain our earnings forecasts and estimate 2024/2025/2026 EPS at RMB1.66/1.86/2.01. We value the stock at 10.9x 2024E PE, at par with its peers’ average on Wind consensus. Our target price is RMB18.09 (previous: RMB18.59). Maintain BUY.