Core Viewpoint - Huicheng Environmental Protection's revenue slightly declined in H1 2025, with net profit significantly impacted by rising costs, leading to a notable year-on-year decrease in profit [1] Financial Performance - Revenue in H1 2025 experienced a slight decline, while net profit saw a larger year-on-year drop due to increased management and financial expenses from new project developments [1] - Overall expenses increased as a result of rising personnel costs and depreciation expenses related to project reserves [1] Profitability Metrics - The comprehensive gross margin improved by 1.5 percentage points to 25.5%, with specific gross margins for resource utilization products and hazardous waste treatment services reaching 24.4% and 27.1%, respectively, reflecting year-on-year increases of 4.4 percentage points and 0.4 percentage points [1] Project Developments - The company successfully conducted trial production of its waste plastic project, indicating strong growth potential in this business segment [1] - The 200,000 tons/year mixed waste plastic resource utilization demonstration project, constructed by Dongyue Chemical, has successfully entered trial production, showcasing stable operation [1] - The project marks the successful industrial verification of the world's first mixed waste plastic deep catalytic cracking (CPDCC) technology, achieving a product yield of over 92% and demonstrating strong replicability and promotion potential [1] Future Outlook - The company is deeply engaged in hazardous waste recycling technology, with significant growth potential in the waste plastic business and promising profit margins anticipated [1] - The investment rating remains at "Buy" due to the expected high growth trajectory [1]

Investment Rating - The report maintains a "Buy" rating for the company [4][6]. Core Views - The company experienced a slight decline in revenue and a significant drop in net profit due to rising costs, with H1 2025 revenue at 560 million yuan (down 5.1% YoY) and net profit at 5.02 million yuan (down 85.6% YoY) [1]. - The resource utilization revenue decreased, while hazardous waste disposal revenue increased, with hazardous waste services generating 350 million yuan (up 5.8% YoY) [2]. - The gross margin improved to 25.5%, with resource utilization and hazardous waste services achieving gross margins of 24.4% and 27.1%, respectively [3]. - The successful trial production of the mixed waste plastic resource utilization project is expected to drive high growth for the company [3]. Financial Summary - Revenue projections for 2025-2027 are 1.77 billion yuan, 2.75 billion yuan, and 4.2 billion yuan, respectively, with corresponding net profits of 170 million yuan, 500 million yuan, and 880 million yuan [4]. - The company’s P/E ratios are projected to be 215.0x, 73.9x, and 42.0x for 2025, 2026, and 2027, respectively [4][5]. - The company’s total assets are expected to grow from 6.5 billion yuan in 2025 to 12.7 billion yuan in 2027 [10].

Core Viewpoint - The company faces short-term profit pressure in 2024, with a significant decline in net profit due to intense competition and rising operational costs [1][2]. Financial Performance - The company reported a revenue of 1.15 billion, a year-over-year increase of 7.3%, while the net profit attributable to shareholders was 40 million, reflecting a year-over-year decrease of 69.24% [1]. - In Q4, the company achieved a revenue of 290 million, showing a slight year-over-year decrease of 0.11%, and a net profit of -839,000, indicating a year-over-year decline of 137.5% [1]. - The overall gross margin decreased by 7.5 percentage points to 24.7%, with specific segments showing varied performance: resource utilization products at 24.8% (down 5.0 percentage points), hazardous waste treatment services at 23.5% (down 10.4 percentage points), and three waste governance services at 33.6% (up 1.8 percentage points) [2]. - The net cash flow from operating activities was 160 million, a year-over-year decrease of 40.0%, primarily due to increased cash payments for goods and services [2]. - The company's expenses increased, with sales, management, and financial expense ratios at 3.0%, 10.7%, and 5.3%, respectively, reflecting increases of 0.5, 2.5, and 0.5 percentage points year-over-year [2]. Strategic Initiatives - The company is committed to technological innovation, having launched a mixed waste plastic deep catalytic cracking technology (CPDCC) that converts mixed waste plastics into high-value products [3]. - A demonstration project for resource utilization of 200,000 tons/year of mixed waste plastics is under construction in Guangdong Province, expected to significantly reduce CO2 emissions from plastic production and incineration [3]. - The company has established strategic partnerships with several firms, which may contribute to its growth trajectory [3]. - The hazardous waste projects are operating steadily, and the vanadium extraction project is anticipated to provide new growth opportunities, with plans for a 1,000 tons/year production facility and two additional 4,500 tons/year facilities [3]. Investment Outlook - The company is projected to achieve revenues of 2.12 billion, 2.75 billion, and 3.43 billion in 2025, 2026, and 2027, respectively, with net profits of 250 million, 500 million, and 710 million, corresponding to price-to-earnings ratios of 113.5, 55.8, and 39.8 [4].