Investment Rating - The report maintains a "Buy" rating for the environmental protection industry [2] Core Insights - The report emphasizes the revaluation of waste incineration assets in the AI era, highlighting their characteristics as high-quality infrastructure with long-term stable value [1][5] - It suggests that waste incineration facilities are essential for meeting public demand and have predictable cash flows due to their monopolistic nature and long-term operating licenses [5][21] - The report also discusses the legislative progress of the Ecological Environment Code, which is expected to enhance environmental policies during the upcoming Two Sessions [5][9] Summary by Sections AI Era of Waste Incineration - Infrastructure assets are experiencing a revaluation driven by the increasing demand for electricity as a core production material in the AI era [13][17] - Waste incineration assets are characterized by supply rigidity, long-term operating licenses, and stable profit cash flows [21][30] - The integration of waste incineration with AI-driven electricity generation is highlighted as a significant development [21][53] Legislative Developments - The report anticipates the approval of the Ecological Environment Code, which focuses on green and low-carbon development, enhancing the framework for environmental policies [5][9] - Key aspects include the promotion of a circular economy and the establishment of a carbon market [5][9] Financial Performance and Market Trends - The average waste disposal volume, power generation, and grid-connected power in the industry showed year-on-year growth of 8%, 7%, and 8% respectively in the first half of 2025 [30][40] - The report notes that the capital expenditure contraction has reached a turning point, with free cash flow improving year by year [44][56] - The waste incineration sector is expected to maintain stable growth, supported by predictable cash flows from waste disposal fees and electricity generation [30][31]