Summary of Longking Environmental Conference Call Company Overview - **Company**: Longking Environmental - **Industry**: Air Pollution Control Equipment Key Points Industry and Market Dynamics - The 2026 environmental special fund budget allocates 46% (CNY 24.4 billion) to air pollution prevention, a 19% increase from the 2025 budget, indicating heightened government focus on air pollution control [2][3][4] - The demand for air pollution control equipment is expected to grow due to the need for retrofitting existing coal power plants and ultra-low emission transformations in non-electric industries such as steel and cement [2][6][7] Company Performance - In the first three quarters of 2025, Longking Environmental secured new environmental orders worth CNY 7.626 billion, a year-on-year increase of 1.1%, with a quarterly growth of 12% [2][6] - The company has a backlog of orders amounting to CNY 19.7 billion, which supports stable revenue recognition and indicates a healthy order pipeline [2][6][9] Financial Health and Growth Prospects - Longking Environmental is the largest manufacturer of air pollution control equipment globally, with annual new orders nearing CNY 10 billion and a backlog close to CNY 20 billion, which is expected to sustain profits over the next three years [2][8][9] - The company is projected to achieve net profits of CNY 1.2 billion, CNY 1.5 billion, and CNY 1.7 billion for the years 2025 to 2027, with corresponding P/E ratios of 16x, 13x, and 11x, reflecting a growth rate exceeding 20% [12][13] Strategic Partnerships and Shareholder Confidence - Major shareholders, including Zijin Mining, have increased their stakes in Longking Environmental, with Zijin's holding rising above 30%, demonstrating confidence in the company's value and business synergy [2][10][11] - Longking Environmental is involved in projects that align with Zijin Mining's green energy needs, such as a 200 MW microgrid project expected to generate over CNY 100 million in annual profit [4][11] New Business Ventures - The company is diversifying into new areas such as high-altitude operation robots and new energy heavy trucks, with investments in JiTai Intelligent and Hunan Chuangyuan, which are anticipated to create a third growth curve for the company [4][12] Conclusion - Longking Environmental is well-positioned to benefit from increased government support and market demand for air pollution control solutions, with a solid order backlog and strategic partnerships enhancing its growth trajectory [2][10][11]

Investment Rating - The report maintains a "Buy" rating for Longking Environmental [1] Core Views - The Ministry of Finance has accelerated the allocation of environmental special funds for 2026, with a significant increase in the proportion of funds for air pollution control, benefiting leading companies in the air pollution sector [8] - Longking Environmental is expected to benefit from the robust demand in the air pollution control market, driven by both fiscal support and ongoing needs for new and upgraded projects in the power and non-power sectors [8] - The report forecasts a substantial increase in net profit for Longking Environmental, with projected net profits of 1.23 billion, 1.53 billion, and 1.75 billion yuan for 2025, 2026, and 2027 respectively [8] Financial Projections - Total revenue is projected to reach 12.1 billion yuan in 2025, 13.3 billion yuan in 2026, and 14.3 billion yuan in 2027, reflecting growth rates of 20.74%, 9.82%, and 7.64% respectively [1] - The report anticipates a significant recovery in net profit margins, with a forecasted net profit growth of 63.15% in 2024, followed by 48.33% in 2025, and continuing growth in subsequent years [1] - Earnings per share (EPS) are expected to increase from 0.65 yuan in 2024 to 1.37 yuan in 2027, indicating a strong upward trend in profitability [1]