Investment Rating - The industry investment rating is "Positive" and maintained [6] Core Viewpoints - The public utility market reform is progressing, which is beneficial for industry profitability and cash flow improvement. The report highlights a valuation recovery logic and is optimistic about quality targets in the waste incineration, water, and gas sectors [2][9] Summary by Sections Event Description - On April 29, 2025, the Guangzhou Development and Reform Commission announced a water price reform, effective June 1, with the first, second, and third tier prices set at 2.55, 3.82, and 7.65 yuan per cubic meter respectively [4] Event Commentary - The report emphasizes the necessity of price adjustments due to rising operational costs for water supply companies, which have seen losses increase from -447 million yuan in 2020 to -653 million yuan in 2022. The price adjustments reflect a balance between profitability and public affordability, with increases of 28.8%, 28.6%, and 93.2% for the respective tiers [9] - Shenzhen is also moving forward with water price adjustments, indicating a broader trend in public utility reforms [9] Market Trends - The report notes that major cities are implementing or considering water price adjustments, which will enhance the profitability of water companies. The waste incineration sector is also expected to benefit from new revenue models and fee structures, while gas pricing reforms are anticipated to improve margins for city gas companies [9] - The report recommends several companies in the waste incineration, water, and gas sectors, including Hanlan Environment, Weiming Environmental, and China Gas, as quality investment targets [9]

Investment Rating - The report suggests that the current sector has investment value, recommending a focus on operators with potential for increased capacity utilization, leading indicators in power generation per ton and heating ratio, lower reliance on subsidies, and higher cash dividend capabilities [1]. Core Insights - The report highlights that the waste incineration sector is entering a phase of positive free cash flow, with significant increases in dividend ratios expected in the coming years. The average dividend ratio is projected to rise from 35% in 2023 to 47% in 2024, driven by a 307% year-on-year increase in free cash flow [3][23][30]. - The report emphasizes the importance of collaboration with IDC (Internet Data Center) operators, which is expected to optimize cash flow curves and business models for waste incineration operators. This partnership is anticipated to create a win-win scenario for all parties involved [3][54]. Summary by Sections Section 1: Industry Overview - The waste incineration industry has achieved a 100% harmless treatment rate for domestic waste by the end of 2023, with a significant shift towards incineration over landfill methods [12][13]. - The fixed cost structure of waste incineration plants is characterized by a high proportion of depreciation and amortization costs, approximately 42.8%, leading to stable cash outflows [15][18]. Section 2: Financial Performance - The report notes that the waste incineration sector is expected to see a substantial increase in free cash flow, with the first year of positive free cash flow occurring in 2023. The average dividend payout ratio is projected to increase significantly in 2024 [3][23][30]. - The cash flow structure is stable, with variable costs linked to fuel prices being only 5.5% of total costs, while the majority consists of labor and auxiliary costs [15][18]. Section 3: Risks and Challenges - The report identifies several risks, including delayed subsidy payments, lower-than-expected capacity utilization for newly commissioned plants, and potential issues with the commercial model leading to accounts receivable delays [2][26]. - The impact of subsidy reductions on project internal rates of return (IRR) is highlighted, with a decrease of 0.1 CNY/KWh potentially lowering IRR from 7.9% to 6.2% [29][34]. Section 4: Strategic Recommendations - The report recommends focusing on regional operators in high electricity price areas (e.g., Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei) that have lower reliance on subsidies and higher cash dividend capabilities [1]. - Collaboration with IDC is seen as a strategic move to enhance cash flow and stabilize revenue streams, particularly in light of increasing energy demands from data centers [54][56].

Investment Rating - The report maintains a "Positive" investment rating for the waste incineration industry [9]. Core Insights - Recent attention has been drawn to waste incineration projects supplying power to IDC (Internet Data Centers), highlighting the potential for these projects to effectively reduce energy consumption and improve cash flow for B-end enterprises [3][16]. - The transition from energy consumption dual control to carbon emission dual control is expected to enhance the demand for renewable energy, particularly from industrial enterprises, benefiting the waste incineration sector [7][36]. - The report emphasizes the feasibility of direct power supply from waste incineration projects to B-end enterprises, which could lead to valuation recovery for the industry [3][8]. Summary by Sections Energy Consumption Control and Approval Process - The tightening of energy consumption policies necessitates energy efficiency assessments for fixed asset investment projects, with significant variations in approval timelines across different regions [5][22]. - IDC projects are specifically required to undergo energy efficiency assessments due to their high energy consumption levels, which often exceed 10,000 tons of standard coal annually [6][25]. Expansion of Green Energy Applications - The application of green energy from waste incineration is anticipated to expand beyond IDC to B-end enterprises, driven by increasing renewable energy demands and regulatory shifts towards mandatory green electricity consumption [7][38]. - The report notes that the carbon market's expansion, now covering over 60% of national CO2 emissions, will further enhance the demand for green certificates from waste incineration companies [7][8]. Challenges and Opportunities in Direct Power Supply - The current limitations on direct power supply to B-end enterprises stem from unresolved pricing mechanisms, but pilot projects in certain regions are beginning to explore direct green electricity supply [8][36]. - The report suggests that overcoming these challenges could lead to a new trend in direct green electricity supply for industrial enterprises, benefiting all stakeholders involved [8][36]. Investment Recommendations - The report recommends focusing on leading companies in the waste incineration sector, including Hanlan Environment, Weiming Environmental, and others, as they are well-positioned to benefit from the anticipated cash flow improvements and valuation recovery [8].

Group 1: Industry Insights - The China Nonferrous Metals Industry Association announced that Chinese rare earth companies will strengthen compliance trade to ensure that related products are not used for military purposes or in sensitive areas [1] - The Ministry of Commerce and the General Administration of Customs of China jointly issued an announcement on April 4, implementing export controls on certain rare earth-related items to prevent improper use [1] - The initiative reflects China's commitment to maintaining global peace and security while promoting high-quality development and safety in the rare earth industry through international cooperation [1] Group 2: Company Developments - Zijin Mining announced the completion of the sale of its subsidiary Bullabulling Gold Pty Ltd, receiving a total consideration of AUD 166.5 million, which includes AUD 156.5 million in cash and AUD 10 million in MI6 shares [2] - This transaction aligns with Zijin Mining's strategy to optimize its asset structure and enhance operational efficiency, focusing on core assets to strengthen competitiveness [2] - Green Power signed a strategic cooperation agreement with Gohigh Technology to explore technology collaboration in areas such as intelligent inspection robots, smart park construction, and carbon reduction [3] - The partnership aims to promote the intelligent upgrade of the waste incineration industry and explore new processes in solid waste treatment, enhancing operational efficiency and resource sharing [3]

Group 1 - The report emphasizes the defensive attributes of the public utility sector, particularly in light of recent policy changes aimed at enhancing price governance mechanisms [1][14][30] - In March, the Shanghai Composite Index fell by 0.07%, while the public utility index rose by 1.87%, indicating a relative outperformance of the sector [1][32] - The report highlights the significant drop in coal prices, which enhances the profitability of thermal power generation, with a projected increase in earnings per kilowatt-hour as coal prices decrease [2][16][18] Group 2 - The report recommends major thermal power companies such as Huadian International and Shanghai Electric, citing their resilience in the face of declining coal prices and electricity prices [3][30] - It notes that the water and waste incineration sectors are entering a mature phase, with improved free cash flow and a favorable investment environment due to declining risk-free rates [31] - The report identifies high-dividend water power stocks, particularly Changjiang Electric Power, as having strong defensive characteristics and long-term investment value [24][25][29] Group 3 - The report discusses the expected stability in nuclear power company earnings, recommending companies like China Nuclear Power and China General Nuclear Power [3][30] - It highlights the growth potential in the renewable energy sector, recommending leading companies such as Longyuan Power and Three Gorges Energy, which are expected to benefit from ongoing government support for new energy development [3][30] - The report also points out the significant market opportunity in the domestic waste oil recycling industry, recommending companies like Shanggou Environmental Energy as beneficiaries of upcoming EU policies [31]

Investment Rating - The report maintains an "Overweight" rating for the environmental protection industry [1]. Core Insights - The national carbon market has expanded to include the steel, cement, and aluminum smelting industries, with a gradual tightening of quotas expected [8]. - There is a focus on garbage incineration to support ultra-low PUE zero-carbon projects, highlighting collaboration opportunities with IDC [9]. - The report emphasizes the importance of cash flow asset value reassessment in a low-interest-rate environment [17]. Summary by Sections Industry Trends - The carbon market expansion will cover over 60% of national carbon emissions, adding approximately 1,500 new enterprises and increasing carbon emissions coverage by about 3 billion tons [8]. - The distribution of quotas will be based on verified actual emissions, ensuring no shortfall for enterprises in 2024, with a balanced quota system for 2025 and 2026 [8]. Company Tracking - Green Power's dividend payout ratio for 2024 is raised to 71.45%, with a projected revenue of 3.399 billion yuan, a 14% decrease year-on-year [4]. - Yongxing Co. is expected to see a revenue increase of 65% to 3.765 billion yuan in 2024, with a significant rise in free cash flow [4]. Collaboration Opportunities - The report discusses three collaboration models for garbage incineration and IDC, highlighting the economic advantages and potential return on equity (ROE) increases [12]. - The collaboration is expected to enhance profitability and cash flow for garbage incineration companies, shifting their business model from government to business [15]. Market Performance - The environmental protection and public utilities index fell by 2.12%, underperforming the broader market [47]. - The report lists top-performing stocks in the environmental sector, with notable gains for companies like Huanhong Technology and Hanlan Environment [51].

Investment Rating - The industry investment rating is "Buy" [2] Core Insights - The report emphasizes the acceleration of "zero-carbon park" construction, with solid waste industrial parks being a key implementation scenario. The central government has highlighted the establishment of zero-carbon parks and factories, aiming for a significant reduction in energy consumption per unit of GDP by 2025 [7][14][20]. - The integration of waste incineration with AIDC (Artificial Intelligence Data Center) is seen as a promising model for developing zero-carbon parks in developed regions. This model can provide comprehensive energy supply and enhance resource utilization [7][14]. - The Shanghai Pudong zero-carbon industrial park, which incorporates waste incineration and AIDC, has achieved a solid waste resource utilization rate of 98.9% and a green energy share of 93.7% [7][27]. Summary by Sections 1. Policy Acceleration for Zero-Carbon Parks - The report discusses the emphasis on "zero-carbon park" construction in recent government meetings, with plans for accelerated implementation across various regions [14][15]. - The tightening of energy consumption indicators is highlighted, with a target of reducing energy consumption per unit of GDP by 3% in 2025 [20][21]. 2. Waste Incineration's Role in Zero-Carbon Parks - The report uses the example of the Shanghai Pudong project to illustrate how waste incineration can contribute to zero-carbon parks, achieving high resource utilization and energy efficiency [27][28]. - The project integrates multiple waste treatment facilities, enhancing the overall sustainability and energy supply stability of the park [27][28]. 3. Recommended Companies to Watch - The report suggests focusing on companies with advantageous locations and solid waste industrial park layouts, including Wangneng Environment, Junxin Co., and Yongxing Co. [7][8]. - It highlights the potential for these companies to benefit from the revaluation of their carbon reduction value and location advantages [7][8].

2 月 15 日-2 月 21 日，上证综指单周累计上涨 0.97 个百分点，报 3379.11；沪深 300 指数单周上涨 1 个百分点。环保（申万）指数 上涨 2.2%，跑赢沪深 300 指数（上涨 1%）1.2 个百分点，跑输创 业板指数（上涨 2.99%）0.79 个百分点。2025 年初至今，环保工 程及服务板块整体指数表现一般，累计涨幅为 1%，跑输沪深 300 指数 0.11 个百分点。 投资建议： 证券研究报告·行业动态 民营企业座谈强调清偿账款，环 保行业盈利质量有望增强 核心观点 近期召开的民营企业座谈会明确提出对民营企业公平参与市场 竞争、解决融资难融资贵、解决拖欠民营企业账款问题等做出部 署；此后，国家发改委也表示要加力推动解决拖欠民营企业账款 问题，加快促进民营经济发展。具体来看，中央财办有关同志表 示 2025 年解决拖欠账款相关工作将进一步深入推进，地方政府 要落实属地责任，用好新增地方政府专项债等政策，尽最大能力 加快偿还拖欠企业账款。对于环保行业来说，地方政府是企业的 主要客户，受地方账款拖欠的影响较大。伴随化债资金的就位和 地方转向债券的发行，环卫行业应收账款有望加速回收， ...

Summary of Conference Call Records Industry Overview - The conference call discusses the **IDC (Internet Data Center)** industry in China, highlighting the competitive landscape and key barriers to entry such as land availability, energy consumption metrics, and bandwidth access [1][5][9]. Key Insights and Arguments - **Market Dynamics**: The IDC industry experienced growth before 2020 due to the rise of cloud computing and video gaming. However, post-2020, new infrastructure policies led to oversupply, and demand decreased due to restrictions on platform economies and the pandemic. A resurgence in AI application demand is expected from late 2024 to mid-2025, particularly in first-tier cities, which will likely drive prices up [1][9][12]. - **Energy Efficiency**: The Shanghai Pudong Li Ming Intelligent Computing Center utilizes waste incineration to meet 70% of its power needs and saves 30% energy through waste heat cooling. This model demonstrates how waste-to-energy plants can reduce operational costs for data centers [1][11]. - **Valuation Potential**: The IDC industry in China still has room for valuation growth, with internet companies increasing their AI capital expenditure expectations. The limited availability of resources near first-tier cities is expected to push prices higher [1][2][12]. Additional Important Points - **Investment Trends**: The waste incineration sector is seeking new growth avenues as major cities complete their incineration projects. Companies like Junxin Co. and Universal Environment are highlighted for their strong cash flow and potential for high dividends [13][14][19]. - **Technological Integration**: The integration of waste incineration with data centers offers advantages such as stable steam supply for cooling, which can significantly lower operational costs compared to traditional energy sources [17][18]. - **Future Outlook**: The IDC industry is projected to grow robustly due to supportive policies, technological advancements, and increasing market demand. Major companies with land reserves, such as GDS Holdings and Century Internet, are expected to see significant growth potential [12][19]. Noteworthy Companies - Companies to watch include **Junxin Co.**, **Universal Environment**, and **Hanlan Environment**, which are well-positioned in first-tier cities and have strong cash flow to support future investments [19]. This summary encapsulates the key points from the conference call, focusing on the IDC industry's current state, future prospects, and the strategic advantages of integrating waste management with data center operations.