2024年中期投资策略：偏见中的机会——让我们重新审视环保

Industry Rating - Buy rating for the environmental protection industry [1] Core Views - The environmental protection sector has undergone significant changes, shifting from a high-leverage, high-growth model to a more stable, utility-like structure [2] - Key changes include: - Transition from PPP projects to stable water and solid waste assets, with operational companies contributing 78% of sector profits in 2023 (up from 37% in 2017) [2] - Improved payment mechanisms and price adjustments, with cities like Shanghai and Guangzhou initiating water price reforms [2] - Investment peak has passed, leading to positive free cash flow and increased dividend potential [2] - Stable profitability and cash flow characteristics make environmental companies attractive in a low-interest-rate environment [2] Key Investment Directions Solid Waste and Water Utilities - Solid waste and water companies offer triple returns: earnings growth, dividends, and valuation upside [2] - Expected 10% CAGR in earnings over the next 2-3 years [2] - Current A-share dividend yield of 3-5%, with potential for higher payouts [2] - Valuation multiples could expand to 15x PE for high-dividend companies [2] - Key companies to watch: - Solid waste leaders: China Everbright Environment, Grandblue Environment, Sanfeng Environment, Conch Venture [2] - Water utilities: Hongcheng Environment, Beijing Enterprises Water Group [2] Turnaround Opportunities - Recovery potential in scientific instruments, equipment, and recycling sectors [2] - Expected rebound in government procurement and equipment renewal demand [3] - Key companies: Jingjin Equipment, Meiai Technology, Saisi Environmental, Langkao Environmental [3] Industry Transformation From PPP to Operational Assets - The era of large-scale PPP projects has ended, with operational assets now dominating the sector [11] - Operational companies' profit contribution increased from 37% in 2017 to 78% in 2023 [15] - Top companies in 2023 are primarily focused on stable operations rather than engineering projects [17] Water Price Reforms - New water pricing policies link water tariffs to asset returns, improving revenue certainty [21] - Multiple cities have initiated water price adjustments, with increases ranging from 0.15 to 0.62 RMB/ton [23] - Water price hikes could boost listed companies' profits by 10-20% [29] Cash Flow Improvement - Solid waste sector has achieved positive free cash flow in 2023, while water sector still requires significant investment [32] - 8 out of 13 major solid waste and water companies achieved positive free cash flow in 2023 [34] - Companies like China Everbright Environment and Grandblue Environment have significantly improved cash flow [35] Sector Characteristics Stable Profitability - Solid waste and water sectors have maintained stable profits despite economic cycles [43] - 2023 net profits: solid waste +7.7%, water +1.4% [43] - Q1 2024 profits: solid waste +8.7%, water +23.8% [43] Long-term Growth Drivers - Urban water supply, wastewater treatment, and waste disposal volumes have shown steady growth [49] - 2011-2022 CAGR: water supply 3.6%, wastewater 5.8%, waste disposal 4.3% [49] - BOT projects provide 20-30 years of exclusive operation rights with stable revenue streams [51] Dividend Potential - Environmental companies are increasing dividend payouts as capital expenditures decline [55] - Average dividend payout ratio increased from 34.5% in 2019 to 45.4% in 2023 [55] - 13 A/H-share companies had dividend yields above 4% in 2023 [55] - Top dividend payers: China Everbright Environment (8.7%), Beijing Enterprises Water Group (9.0%), Hongcheng Environment (5.2%) [57]