Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [1]. Core Views - The company is expected to see a significant increase in cash flow, with a turning point towards positive free cash flow anticipated in 2025. The potential for dividend increases is substantial, driven by reduced capital expenditures and stable operational cash flow [8][14]. - The company's main business, focused on waste-to-energy operations, is projected to lead profit growth, while the performance of its cement business is stabilizing, indicating a potential revaluation of equity value [8][14]. Summary by Sections 1. Cash Flow and Dividend Potential - The company has a strong focus on waste incineration power generation and indirectly holds a 17.8% stake in Conch Cement. As of the end of 2024, the company’s net profit attributable to shareholders is projected at 2.02 billion yuan, a decrease of 18.03% year-on-year [8][14]. - Operating cash flow has increased to 2.02 billion yuan in 2024, with capital expenditures decreasing significantly from a peak of 6.91 billion yuan in 2021 to 2.83 billion yuan in 2024 [8][14]. - The dividend payout for 2024 is expected to be 657 million yuan, representing a 100% increase, with a dividend ratio of 32.51% [8][14]. 2. Cost of Capital and Operational Efficiency - The company has a competitive edge with a financing cost of 2.51%, the lowest in its industry, and a high capacity utilization rate of 111% in 2024 [8][14]. - The company’s waste treatment operations have a gross profit margin of 47.38%, aligning with industry averages, and the average return on equity (ROE) for its main business is 7.92%, slightly above the industry average [8][14]. 3. Cement Business Performance - The cement business is stabilizing, with a projected net profit of 800 million yuan in 2025, and the equity value of the cement stake is expected to be reassessed as performance improves [8][14]. - The report indicates that the current market valuation of the company does not fully reflect the value of its stake in Conch Cement, which is estimated to be significantly undervalued [8][14]. 4. Future Profitability and Growth - The company anticipates a net profit of 2.18 billion yuan in 2025, with a year-on-year growth of 8%, and a corresponding price-to-earnings ratio of 7.06 [1][8]. - The report highlights the potential for significant dividend increases in 2025 and 2026, with projected dividend yields of 5.8% and 10.6%, respectively [8][14].
海螺创业：资金&效率双强，现金流回正大增，资产价值重估-20250611