Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [2][7]. Core Insights - The company is a leader in waste incineration, with a significant cash flow turning point expected, leading to potential increases in dividends [6][7]. - The company has a total waste-to-energy capacity of 150,400 tons/day, ranking first in the industry, and is supported by its major shareholder, China Everbright Group, which holds 43.07% of the company [6][21]. - The report anticipates a recovery in profitability due to improved operational income, reduced impairment, and lower financial costs [6][54]. Summary by Sections Company Overview - The company has been focused on environmental protection for over 20 years, with a waste incineration capacity of 150,400 tons/day as of the end of 2024, leading the industry [17][28]. - The company operates in three main segments: Environmental Energy, Green Environmental Protection, and Water Services, with the Environmental Energy segment contributing 87% to the net profit in 2024 [6][24]. Financial Summary and Profit Forecast - The company’s revenue for 2024 is projected at HKD 30,258 million, with a year-on-year decline of 7%, and a net profit of HKD 3,377 million, down 24% year-on-year [5][54]. - The report forecasts net profits for 2025-2027 to be HKD 3,589 million, HKD 3,810 million, and HKD 4,055 million respectively, with a price-to-earnings ratio of 8x leading to a target market value of HKD 28,710 million, indicating a 23% upside potential [5][7]. Operational Improvements - The company has seen a significant reduction in capital expenditures (Capex), from HKD 22.8 billion in 2021 to HKD 5.1 billion in 2024, contributing to a positive free cash flow of HKD 4.416 billion for the first time [6][7]. - The operating cash flow is expected to improve due to accelerated national subsidies, with an adjusted operating cash flow of HKD 9.52 billion anticipated for 2024 [6][7]. Dividend Potential - The company has a current dividend yield of 6.04%, with a historical dividend payout ratio of approximately 31%, expected to increase to 42% in 2024 [6][7]. - The report suggests that with improving profits and cash flow, there is significant potential for future dividend increases [6][7]. Market Perception - The market has not fully recognized the company's potential for profit recovery and dividend increases, primarily due to the complexity of its financial statements [9][10].

Core Viewpoint - The company reported a significant decline in both revenue and net profit for the year 2024, indicating challenges in the market and operational performance [2]. Group 1: Financial Performance - In 2024, the company achieved total revenue of 144.685 billion yuan, a year-on-year decrease of 12.03%, and a net profit attributable to shareholders of 2.032 billion yuan, down 59.99% year-on-year [2]. - In Q4 2024, the company recorded revenue of 33.018 billion yuan, a decline of 25.29% year-on-year and 7.55% quarter-on-quarter, with a net profit of 261 million yuan, down 73.22% year-on-year and 40.68% quarter-on-quarter [2]. Group 2: Sales and Margins - The company's steel sales in 2024 totaled 25.3 million tons, a decrease of 4.64% year-on-year, with an average steel price of 4,339.21 yuan per ton, down 6.59% year-on-year. The gross profit per ton of steel was 191.33 yuan, reflecting a year-on-year decline of 38.16% [3]. Group 3: R&D and Financial Health - The R&D expense ratio for 2024 was 3.95%, with R&D investment amounting to 5.722 billion yuan. The proportion of specialty steel sales increased by 2 percentage points to 65% [4]. - The total depreciation expense reached a 13-year high of 4.02 billion yuan, marking a year-on-year increase of 160 million yuan. Free cash flow turned positive at 1.052 billion yuan, and the dividend payout ratio was 33.99%, resulting in a dividend yield of 1.85% based on the current stock price [4]. Group 4: Strategic Developments - The automotive sheet subsidiary achieved a net profit of 2.049 billion yuan in 2024, leading the lightweight development trend in the automotive industry through innovative applications and technologies [5]. - The company announced plans to raise up to 1.5 billion yuan through external investors for its electromagnetic materials company, maintaining a controlling stake of no less than 51%. This funding will accelerate project implementation, with the first phase of silicon steel production already operational [6].