LK(SH:600388)2024-03-25 16:00Investment Rating - The report maintains a "Recommended" rating for Longking Environmental Protection (龙净环保) [1] Core Views - The company reported a revenue of 10.973 billion yuan in 2023, a year-over-year decrease of 7.64%, and a net profit attributable to shareholders of 509 million yuan, down 36.74% year-over-year [1] - The decline in net profit was primarily due to goodwill impairment, which totaled 418 million yuan, with 361 million yuan attributed to goodwill impairment [1] - The company’s gross margin and net margin were 23.68% and 4.61%, respectively, with a slight increase in gross margin but a decrease in net margin year-over-year [1] - The company’s cash flow from operations significantly improved, reaching 1.706 billion yuan, a year-over-year increase of 104.44% [1] - The company is the largest manufacturer of air pollution control equipment globally, with a stable performance in environmental equipment manufacturing, generating 9.829 billion yuan in revenue [1] Financial Performance Summary - The company’s total liabilities ratio was 68.58%, a decrease of 2.74 percentage points year-over-year, and the interest-bearing debt ratio was 19.77%, indicating a relatively low level of debt [1] - The company’s new environmental engineering contracts amounted to 10.287 billion yuan, a year-over-year increase of 5.11%, with the power industry accounting for 58.11% of the contracts [1] - In the renewable energy sector, the company achieved a revenue of 36.64 million yuan with a gross margin of 46.62%, indicating strong profitability [1] - The company is expected to see significant growth in its renewable energy business in 2024, driven by the launch of energy storage and green electricity projects [1] Valuation Analysis - The projected net profits for 2024, 2025, and 2026 are 1.143 billion yuan, 1.349 billion yuan, and 1.620 billion yuan, respectively, with corresponding price-to-earnings (PE) ratios of 11.62, 9.85, and 8.20 [1]