Investment Rating - The report maintains an "Accumulate" rating for the environmental protection industry [1] Core Views - The report highlights the accelerating growth of orders for unmanned sanitation equipment and the approaching economic viability of small-tonnage equipment, alongside the marketization of water prices and a cash flow turning point, indicating a potential next phase for waste incineration [1][5] Summary by Sections Unmanned Sanitation Equipment - The economic viability of small-tonnage unmanned sanitation equipment is improving, with orders showing a scattered growth trend. One unit plus one operator can replace 3-4 workers, achieving economic feasibility as prices drop to 200,000 yuan [9][10] - The market potential for unmanned sanitation equipment is estimated to reach hundreds of billions, with a conservative assumption of a 20% replacement rate leading to a market space of 575 billion yuan for small-tonnage and 761 billion yuan for large-tonnage equipment [10][11] - Orders for unmanned sanitation equipment are projected to grow by 129% year-on-year in 2025, with over 180 projects expected [12] Waste Incineration - The report emphasizes that declining capital expenditures will enhance free cash flow and dividends in the waste incineration sector. The sector's free cash flow turned positive in 2023 and is expected to continue improving [14][16] - Companies like Junxin and Green Power are projected to have significant dividend payouts, with Junxin's dividend ratio reaching 94.59% in 2024 [14][16] Water Operations - The water operations sector is poised for growth due to marketization and improved cash flow, with companies like Xingrong and Hongcheng Environment expected to maintain high dividend ratios [18][21] - The report suggests that water price reforms will lead to sustainable growth, with potential for significant valuation increases similar to trends seen in the U.S. water industry [18][20] Industry Trends - The report notes a 90.56% year-on-year increase in sales of new energy sanitation vehicles, with a penetration rate of 15.86% [28] - The average price of biodiesel remains stable, with a slight increase in profitability per ton [37] - The lithium battery recycling sector is experiencing a decline in profitability, with fluctuating metal prices impacting margins [40]

Investment Rating - The report maintains an "Accumulate" rating for the environmental protection industry [1] Core Viewpoints - The automation and intelligence of urban sanitation operations are being achieved through unmanned sanitation equipment, which can be categorized into small-tonnage, large-tonnage, and humanoid robots [4][10] - Small-tonnage unmanned equipment is expected to be more economical and will likely see earlier market adoption [4][13] - The market potential for unmanned sanitation and driving equipment is estimated to reach a trillion yuan level, with various scenarios predicting market sizes ranging from 575 billion to 1,522 billion yuan depending on the adoption rates [4][15] - The industry is actively engaging in the layout of intelligent and unmanned solutions, addressing labor shortages and aging workforce issues in the sanitation sector [4][18] - Orders for unmanned sanitation equipment are accelerating, showing a trend of scattered volume growth, with significant government contracts [4][40] Summary by Sections 1. Automation and Intelligence in Sanitation - Unmanned sanitation equipment utilizes advanced technologies for automation and intelligence, categorized into small-tonnage, large-tonnage, and humanoid robots [10] - Small-tonnage equipment serves semi-enclosed areas, while large-tonnage equipment is designed for open environments [12] 1.2 Economic Analysis - Small-tonnage unmanned equipment can replace 3-4 workers, with a current price of around 300,000 yuan, becoming economically viable as prices drop to 200,000 yuan [13] - Large-tonnage unmanned vehicles currently lack economic viability but could become competitive if prices decrease to 600,000 yuan [13] 1.3 Market Potential - The market for unmanned sanitation equipment is projected to be substantial, with estimates of 575 billion yuan under conservative assumptions and up to 1,522 billion yuan under optimistic scenarios [15] 2. Active Participation in Unmanned Solutions - Various companies are actively developing and deploying unmanned sanitation solutions, addressing labor challenges and enhancing mechanization rates [18][19] 3. Order Growth Trends - The number of contracts for unmanned sanitation projects is increasing, with projections indicating a 129% year-on-year growth in total contract value for 2025 [40][41]