Investment Rating - The report assigns a "Buy" rating for the company, with a current price of 6.32 HKD and a target value of 10.60 HKD [2]. Core Views - The company is transforming from a shadow stock of "Anhui Conch Cement" to a dual driver of solid waste and cement equity, with expectations of improved cash flow and profitability in the coming years [2]. - The solid waste business is shifting from a "blood-sucking" model to a "blood-generating" model, with a focus on small-scale waste incineration projects [2]. - The profitability of "Anhui Conch Cement" is expected to stabilize, leading to a potential revaluation of the company's equity assets [2]. - The company is projected to achieve significant improvements in free cash flow and dividend income from its investments in joint ventures [2]. Summary by Sections Section 1: Cement Profitability and Solid Waste Investment - The company, as an employee stock ownership platform of the Anhui Conch Group, holds an 18% indirect stake in "Anhui Conch Cement" and focuses on solid waste incineration projects [12]. - The company has experienced fluctuating net profits from 2021 to 2023, with net profits of 69.1, 38.5, and 24.6 billion CNY, respectively, due to high investments in solid waste and declining profits from "Anhui Conch Cement" [2][23]. - Future projections indicate a recovery in free cash flow and stable dividend income from joint ventures, with expected contributions of 5.1, 25.1, and 30.0 billion CNY from 2024 to 2026 [2]. Section 2: Small-Scale Incineration Projects - The company is collaborating with Kawasaki Heavy Industries to develop small-scale waste incineration projects, with operational capacity expected to increase significantly [2]. - The transition from reliance on unstable dividends from "Anhui Conch Cement" to a more stable cash flow from its core business is anticipated to enhance dividend stability [2]. Section 3: Valuation of Cement Equity - The theoretical market value of the company's 18% stake in "Anhui Conch Cement" is estimated at 236 billion HKD, while the company's current market value is only 113 billion HKD [2]. - The report suggests that the profitability of "Anhui Conch Cement" is nearing a bottom, and the company's equity assets are likely to undergo a revaluation [2]. Section 4: Profit Forecast and Investment Recommendations - The company is expected to achieve net profits of 24.4, 26.7, and 28.7 billion CNY from 2024 to 2026, corresponding to PE ratios of 4.3, 3.9, and 3.6 times [2]. - The report concludes with a reasonable value estimate of 9.76 HKD per share, reinforcing the "Buy" rating based on improved cash flow and profitability [2].
海螺创业：底部反转“双重奏”，高股息的未来时