Investment Rating - The report maintains an "Increase" rating for the environmental protection industry [1] Core Views - The issuance of the "Ecological Environment Protection Supervision Work Regulations" by the Central Committee of the Communist Party of China and the State Council aims to comprehensively promote the construction of a beautiful China [8] - The solid waste sector is expected to see improved cash flow and increased dividends due to reduced capital expenditures and enhanced operational efficiency [9][12] - The water service sector is experiencing stable growth and high dividends, with water price reforms expected to reshape growth and valuation [12][14] Summary by Sections Solid Waste Management - Capital expenditures are decreasing, leading to significant improvements in free cash flow and increased dividends [9] - Key companies such as Junxin Co. are projected to distribute cash dividends of 507 million yuan in 2024, a 37% increase year-on-year, with a dividend yield of 4.4% [9] - The industry is entering a mature phase, with operational efficiency being enhanced through cost reduction and collaborations in heating and IDC [9][10] Water Services - The water service sector's revenue is projected at 65.5 billion yuan in 2024, with a net profit of 11.2 billion yuan, reflecting a 27% increase [12] - Water price reforms in cities like Guangzhou and Shenzhen are expected to drive a new round of price adjustments, enhancing profitability and stability [13][14] - Companies such as Yuehai Investment are highlighted for their ability to frequently adjust prices, with an expected dividend yield of 6.9% in 2025 [14] Environmental Equipment - The penetration rate of new energy sanitation vehicles increased by 6.14 percentage points to 14.55% in the first four months of 2025, with sales of new energy sanitation vehicles rising by 73% [29] - The total sales of sanitation vehicles reached 24,542 units, with a slight year-on-year decrease of 0.2% [29] Biofuels - The prices of biodiesel and waste cooking oil have decreased, leading to negative profit margins [37][38] - The average price of biodiesel was 7,700 yuan per ton, down 5.5% week-on-week, while waste cooking oil averaged 6,018 yuan per ton, down 1.2% [37] Lithium Battery Recycling - The profitability of lithium battery recycling has slightly declined due to fluctuating metal prices and a decrease in discount coefficients [41][42] - The average unit gross profit for waste material is estimated at -0.71 million yuan per ton [41]

Investment Rating - The report maintains an "Accumulate" rating for the environmental protection industry [1]. Core Insights - The report highlights the collaboration between Qiaoyin Co. and Guodi Center to advance humanoid robot applications in urban services, marking a significant development in the industry [9]. - It emphasizes the trend of decreasing capital expenditures in waste incineration, leading to improved free cash flow and increased dividends, while also noting the enhancement of ROE through efficiency improvements in heating and IDC collaborations [10][11]. - The water utility sector is experiencing stable growth and high dividends, with water price reforms expected to reshape growth and valuation [12][13]. Summary by Sections Humanoid Robot Development - Qiaoyin Co. has signed a cooperation agreement with Guodi Center to launch humanoid robots for urban services, with an initial order of 1,000 robots aimed at street sanitation applications [9]. Waste Incineration Sector - The report identifies two key factors for the solid waste sector: a decrease in capital expenditures leading to improved free cash flow and increased dividends, and a focus on efficiency improvements during the industry's maturity phase [10]. - Specific dividend forecasts for 2024 include: - Junxin Co.: cash dividend of 507 million yuan (+37%), dividend ratio of 94.59% (+22.78 percentage points), and a dividend yield of 4.4% - Green Power: cash dividend of 418 million yuan (+100%), dividend ratio of 71.45% (+38.23 percentage points), with A-share and Hong Kong dividend yields of 4.2% and 8.2% respectively - Hanlan Environment: proposed dividend of 652 million yuan (+67%), dividend ratio of 39.20% (+11.83 percentage points), and a dividend yield of 3.5% [10]. Water Utility Sector - The water utility sector is projected to see stable growth, with 2024 revenues of 65.5 billion yuan (-2%) and a net profit of 11.2 billion yuan (+27%), excluding one-time gains [12]. - Water price reforms in Guangzhou and Shenzhen are expected to drive a new round of price adjustments, enhancing profitability and stability in the sector [13][14]. Environmental Equipment and Renewable Energy - The report notes a 51% increase in sales of new energy sanitation vehicles in early 2025, with a penetration rate of 14.36%, reflecting a growing trend towards electrification in the sanitation equipment sector [29]. - The average price of biodiesel has decreased slightly, with a narrowing price gap between biodiesel and waste oil, impacting profitability [36]. Lithium Battery Recycling - The report indicates a slight decline in profitability in lithium battery recycling due to fluctuating metal prices and a stable discount coefficient, with average unit profits showing a minor decrease [39].

Investment Rating - The report maintains an "Accumulate" rating for the environmental protection industry [1] Core Views - The report highlights the collaboration between Qiaoyin Co. and Guodi Center to advance humanoid robot applications in urban services, marking a significant development in the industry [9] - It emphasizes that the solid waste sector is experiencing a decrease in capital expenditure, leading to improved free cash flow and increased dividends, while also enhancing return on equity (ROE) through efficiency improvements in heating and IDC [10][12] - The water services sector is noted for its stable growth and high dividends, with water price reforms expected to reshape growth and valuation [12][14] Summary by Sections Humanoid Robot Development - Qiaoyin Co. has signed a cooperation agreement with Guodi Center to launch humanoid robots for urban services, with an initial order of 1,000 robots aimed at street cleaning and maintenance [9] Solid Waste Management - The report identifies two key trends: a reduction in capital expenditure leading to improved free cash flow and increased dividends, and a focus on efficiency improvements as the industry matures [10] - Specific dividend forecasts for 2024 include: - Junxin Co.: cash dividend of 507 million yuan (+37%), dividend ratio of 94.59% (+22.78 percentage points), and a dividend yield of 4.4% - Green Power: cash dividend of 418 million yuan (+100%), dividend ratio of 71.45% (+38.23 percentage points), with A-share and Hong Kong stock dividend yields of 4.2% and 8.2% respectively - Hanlan Environment: proposed dividend of 652 million yuan (+67%), dividend ratio of 39.20% (+11.83 percentage points), and a dividend yield of 3.5% [10] Water Services - The water services sector is projected to see stable growth, with 2024 revenues of 65.5 billion yuan (-2%) and net profits of 11.2 billion yuan (+27%), excluding one-time gains [12] - Water price reforms in Guangzhou and Shenzhen are expected to drive a new round of price adjustments, enhancing profitability and stability [13][14] Industry Trends - The report notes a 51% increase in sales of new energy sanitation vehicles in the first quarter of 2025, with penetration rates rising to 14.36% [29] - The bio-diesel market is experiencing a decline in prices for both bio-diesel and waste oil, leading to a narrowing price gap [36] - The lithium battery recycling sector is facing slight declines in profitability due to fluctuating metal prices and discount coefficients [39]

Investment Rating - The report maintains a "Positive" investment rating for the environmental sector [11] Core Insights - The environmental sector's net profit attributable to the parent company is expected to decline by 6.6% in 2024 and increase by 3.9% in Q1 2025, with solid performance in waste incineration and water services [2][6] - The sector's revenue for 2024 is projected at 305.7 billion, a slight decrease of 0.44% year-on-year, while the net profit attributable to the parent company is expected to be 20.9 billion, down 11.1% [6][22] - The report highlights the improvement in free cash flow for waste incineration and water services, indicating a potential for higher dividends in the future [8][9] Summary by Sections Profit and Loss Statement - In 2024, the environmental sector is expected to achieve a revenue of 3057 billion, with a net profit of 209 billion, reflecting a decline of 11.1% year-on-year [6][22] - The sector's gross margin is projected to be 27.5%, an increase of 0.46 percentage points compared to the previous year [6][22] Balance Sheet - The environmental sector's debt ratio is expected to stabilize at 57.17%, a decrease of 0.19 percentage points year-on-year [7] - Accounts receivable as a percentage of revenue is projected to increase by 7.0 percentage points to 62.8% in 2024, indicating pressure on local government finances [7] Cash Flow Statement - The cash collection ratio for the environmental sector is expected to be 91.4%, an increase of 1.7 percentage points year-on-year [8] - The free cash flow for the sector is projected to be 2.1 billion, an increase of 10.5 billion year-on-year, with significant improvements in waste incineration and water services [8] Investment Strategy - The report suggests a moderately optimistic outlook for the sector, driven by market reforms and the "14th Five-Year Plan" assessment year, which may enhance cash flow and valuation recovery [9] - Key investment targets include companies in waste incineration and water services, such as Huaneng Environment, Xingrong Environment, and Weiming Environmental [9]