Soochow Securities·2025-06-11 00:23Investment Rating - The report maintains an "Accumulate" rating for the waste incineration sector [1] Core Insights - The report emphasizes analyzing waste incineration assets from a cash flow perspective, highlighting that improvements in asset quality are reflected in increased free cash flow and enhanced ROE. The marginal changes in cash flow represent variations in asset valuation within DCF models, supporting the potential for increased dividends [10][1] - The waste incineration sector is expected to see a steady increase in dividend potential due to declining capital expenditures and improved cash flow management, with projected dividends for 2024 showing significant increases across various companies [3][24] Summary by Sections Cash Flow Analysis - The waste incineration sector has experienced a decline in capital expenditures, leading to a positive trend in free cash flow. The operating cash flow net amount for 2024 is projected to be 15% higher than the previous year, reaching 157 billion [21][19] - Free cash flow is expected to increase significantly, from 27 billion in 2023 to 66 billion in 2024, indicating a robust capacity for dividend distribution [21][24] ROE and Profitability - The report notes a recovery in ROE and PB ratios, with 2024 ROE projected at 11.53%, a slight increase from 11.32% in 2023. This recovery is attributed to reduced capital expenditures and improved operational efficiency [2][40] - The waste incineration sector's total revenue for 2024 is estimated at 457 billion, with a 1% increase year-on-year, and a net profit of 88 billion, reflecting a 13% growth [30][35] Investment Recommendations - The report suggests that the solid waste sector has significant potential for increased dividends, with companies like Green Power and Hanlan Environment expected to raise their dividends substantially in 2024 [3][24] - The analysis indicates that several companies within the sector could achieve dividend potentials exceeding 100%, with specific companies identified for their strong dividend capabilities [15][14]