兴蓉环境（000598）：产能增长贡献业绩，盈利能力稳步提升

Investment Rating - The investment rating for Xingrong Environment is "Buy" [1] Core Views - The report highlights that the company's capacity growth is contributing to performance, with steady improvement in profitability. In Q1 2025, the company achieved operating revenue of 2.023 billion yuan, a year-on-year increase of 9.61%, and a net profit attributable to shareholders of 508 million yuan, up 11.19% year-on-year [1][4] - The report forecasts the company's revenue for 2025-2027 to be 9.795 billion, 11.180 billion, and 11.763 billion yuan respectively, with net profits of 2.167 billion, 2.484 billion, and 2.608 billion yuan, indicating a strong growth outlook [3] Summary by Sections Financial Performance - In Q1 2025, the company reported a net profit of 508 million yuan, a year-on-year increase of 11.2%, primarily due to the commissioning of new water supply capacities [4] - The gross profit margin for Q1 was 46%, an increase of 2.18 percentage points year-on-year, while the net profit margin was 25.69%, up 0.31 percentage points year-on-year [4] - The operating cash flow for Q1 was 115 million yuan, a significant increase of 526.47% year-on-year [1] Capacity Expansion - The company is expanding its water supply and wastewater treatment capacities, with several projects expected to come online in 2025, including the Chengdu Water Plant and the Chengdu Qilong Water Treatment Plant [4] - The total operational, under-construction, and planned water supply and drainage projects exceed 9 million tons per day, which is expected to contribute to revenue growth in the coming years [4] Profitability and Cost Management - The report indicates effective control over operating expenses, with the selling expense ratio decreasing by 0.25 percentage points year-on-year to 11.05% [4] - The company maintains a leading profitability position in the industry, with a 100% market share in the main urban area of Chengdu for both water supply and wastewater services [4] Future Outlook - The company is expected to maintain stable growth and dividend potential, with projected P/E ratios of 9.96x, 8.69x, and 8.28x for 2025, 2026, and 2027 respectively [3] - The report emphasizes the company's strong cash flow stability due to its user-pay model in the water supply business, which supports consistent revenue inflow [4]