Investment Rating - The report maintains an "Increase" rating for the environmental protection industry [1] Core Views - The national green electricity direct connection policy opens up cooperation space for waste incineration power generation and IDC [9][12] - The solid waste sector is expected to increase dividends and improve ROE through heat supply and IDC expansion [1][14] - The industry is entering a mature phase, leading to reduced capital expenditures and improved free cash flow, which enhances dividend payouts [14] Summary by Sections Industry Trends - The environmental protection sector has shown a significant increase in new energy sanitation vehicle sales, with a year-on-year growth of 73% and a penetration rate of 14.55% [26][28] - The waste incineration sector is expected to benefit from reduced capital expenditures and improved cash flow, leading to higher dividends [14][17] Key Recommendations - Strongly recommended companies include: Huanlan Environment, Green Power, Yongxing Co., and China Water Affairs [1][14] - Companies to watch include: Lian Tai Environmental Protection, Wang Neng Environment, and Beikong Water Group [1] Policy Tracking - The green electricity direct connection policy requires new projects to have over 80% green electricity, which is expected to drive the integration of waste incineration power generation with data centers [12][13] - The policy aims to facilitate the supply of green electricity directly to high-energy-consuming industries, enhancing economic efficiency [10][11] Financial Performance - The water service sector is projected to see stable growth with high dividends, supported by recent water price reforms in major cities [17][19] - The report highlights specific dividend payouts for companies like Junxin Co. (5.07 billion CNY), Green Power (4.18 billion CNY), and Huanlan Environment (6.52 billion CNY) for 2024 [14][17] Market Performance - The environmental protection and public utilities index rose by 3.53%, outperforming the broader market indices [50] - Notable stock performances include Yuhua Tian (55.7% increase) and Bosch Tech (42.56% increase) [51]