Investment Rating - The report maintains an investment rating of "Outperform the Market - A" [7] Core Insights - The sanitation operation market experienced a year-on-year decline of 3% in annual transaction value for the first half of 2025, marking the largest drop since 2015, with a total of 456 billion yuan [21][27] - New business models such as sanitation vehicle leasing, unmanned sanitation, and urban management services have shown remarkable performance, achieving an annual transaction value of 74.5 billion yuan, accounting for 16.4% of the total [27] - The trend towards automation and unmanned operations is driven by rising labor costs and an aging population, necessitating an increase in mechanization rates in the sanitation sector [2][30] Summary by Sections 1. Sanitation Operation Market Review - The annual transaction value for sanitation services in the first half of 2025 was 456 billion yuan, down 3% year-on-year, the largest decline in a decade [21] - The number of sanitation franchise projects opened in the first half of 2025 was 17, significantly lower than the 30 projects in the first half of 2024 and 38 in the second half of 2024 [21] 2. New Energy and Unmanned Operations - The sanitation industry is increasingly adopting unmanned operations to address labor shortages, with over 200 unmanned sanitation equipment procurement projects initiated in the first half of 2025 [2] - The total contract value for "sanitation + unmanned driving" projects exceeded 70 billion yuan, with 102 pilot projects launched across 15 provinces [2][43] 3. Major Company Developments - Leading sanitation companies are actively developing unmanned equipment, such as Yingfeng Environment's "Bee Colony" smart cleaning robot and Yutong Heavy Industry's unmanned sanitation vehicles [3][48] - Qiaoyin Co. is collaborating with national teams to develop humanoid robots for urban services, while Yuhua Tian is enhancing its smart sanitation capabilities through strategic partnerships [3][48] 4. Market Performance Review - From August 2 to August 15, 2025, the Shanghai Composite Index rose by 3.84%, while the environmental index increased by 4.34%, outperforming the composite index [63][65] 5. Investment Recommendations - The report suggests focusing on quality operators in the green electricity sector, such as Funiang Co. and Zhongmin Energy, and highlights the potential of virtual power plants [13] - In the sanitation sector, companies like Qiaoyin Co., Yuhua Tian, and Yingfeng Environment are recommended due to their advancements in automation and unmanned technologies [14]

Summary of Key Points from Conference Call Industry Overview - The conference call discusses the **new energy sanitation equipment industry**, highlighting significant growth in sales and market dynamics for the first half of 2025 [1][2]. Core Insights and Arguments - **Sales Growth**: In the first half of 2025, sales of new energy sanitation vehicles increased by **95.9% year-on-year**, with a penetration rate of **16.1%**. This growth is attributed to a low industry base, accumulated replacement demand, policy incentives, and declining costs [1][2]. - **Cost Competitiveness**: New energy sanitation equipment is expected to achieve cost parity with traditional diesel or gasoline vehicles within **3-4 years** of a **5-8 year** usage cycle, driven by cost advantages and government policies promoting procurement [1][4][5]. - **Market Demand for Autonomous Equipment**: A total of **648 autonomous sanitation devices** were procured across **22 provinces, 54 cities, and 80 districts** in the first half of the year, with expectations of annual procurement reaching **1,500 to 2,000 units**, indicating significant market demand for autonomous solutions [1][9]. Competitive Landscape - **Market Leaders**: The competitive landscape remains stable, with **Yingfeng Environment** (Zhonglian) maintaining a leading position. However, some smaller brands have seen an increase in market share, reflecting local governments' sensitivity to pricing [1][6]. - **Company Performance**: Companies like **Yutong** and **Fulongma** have shown varied performance, with Yutong's market share at **3.4%** and Fulongma at **7.9%**. Yutong's performance improved in Q2 with a **91% year-on-year increase** [6][8]. Additional Important Insights - **Technological Advancements**: The growth of autonomous sanitation equipment is driven by labor shortages, rising labor costs, and advancements in technology such as sensor precision and L4 level autonomous driving [3][10][11]. - **Impact of Legal Changes**: The new regulations from the Supreme People's Court regarding social insurance payments may increase operational costs for companies but could also accelerate the demand for autonomous sanitation equipment as a response to rising labor costs [3][13]. - **Future Trends**: The future of the environmental protection industry is expected to focus on **intelligent and automated solutions**, with projections of **50,000 to 60,000 new autonomous sanitation vehicles** being added annually in the coming years [14][15].

Economic Performance - The regional GDP of Nanchong reached 135.695 billion yuan, ranking 5th in the province, with a year-on-year growth of 5.4%, ranking 16th in the province [5] - The industrial added value above designated size in the city grew by 8.8% year-on-year, ranking 12th in the province [5] - A record 51 new industrial enterprises were upgraded to designated size, marking the best performance in the past 13 years [5] Project Development - The Chengnan Expressway expansion project has completed 80% of its total progress, with ongoing construction of the main beam and auxiliary works [6] - The Lidoonggou Tunnel in Nanchong has achieved dual-lane penetration, marking the completion of all nine tunnels along the line [6] - In the first half of the year, Nanchong completed investments of 22.56 billion yuan in 40 provincial key projects and 79.98 billion yuan in 300 municipal key projects, achieving completion rates of 72.8% and 68.1% respectively [7] Industrial Upgrading - Sichuan Ouwang Electric Technology Co., Ltd. has developed an autonomous cleaning vehicle that can clean 10,000 square meters in 40 minutes, with a dust removal rate of 99% [8] - Nanchong Ruihong Automotive Industry Co., Ltd. has achieved a 90% automation level in its factory, resulting in a 30% increase in production efficiency and a 10% reduction in costs [8] - The intelligent factories of Geely and Zhongke Jiwei Technology Co., Ltd. have been recognized as advanced intelligent factories in Sichuan Province, highlighting the importance of digital transformation in manufacturing [9]

Group 1 - Jinan Yitong Urban Construction Group's "Urban Steward" service brand has been recognized as an excellent case of brand value in Shandong [1] - The company has established itself as a comprehensive urban operation service provider, integrating investment, construction, and operation [1][4] - Yitong has upgraded its services in five key areas: infrastructure construction and maintenance, landscape greening, urban services, flower cultivation and trade, and new material research and sales [1][4] Group 2 - Yitong City Service Company focuses on urban sanitation and public facility management, emphasizing environmental cleanliness and waste classification [4][19] - The company has implemented a "smart urban management system" to enhance the efficiency and standardization of sanitation operations [4][11] - The introduction of a smart management platform has improved the coordination and response time for sanitation services [11][13] Group 3 - The company has adopted new energy sanitation vehicles to enhance operational efficiency and reduce environmental impact [24][27] - The new vehicles are designed to minimize noise and emissions, making them suitable for use in residential areas [27] - The deployment of these vehicles has led to a significant reduction in operational costs, with energy expenses decreasing by over 65% [27] Group 4 - Yitong's "Urban Service Smart Brain" platform integrates various technologies to provide comprehensive management solutions for sanitation operations [19][22] - The platform enables real-time monitoring and data analysis, facilitating efficient management of sanitation tasks and resources [20][22] - The company aims to achieve a high standard of urban management through the integration of smart technologies and sustainable practices [28]

Financial Performance - In 2024, the company achieved a total revenue of CNY 131.18 billion, with a net profit of CNY 5.14 billion, demonstrating stable profitability [2] - The urban services segment signed 76 new projects, covering 20 provinces, with a new annual contract value of CNY 1.486 billion, ranking second in the industry [1] - The environmental equipment sales reached CNY 51.87 billion, a year-on-year increase of 2.01%, maintaining the top position in domestic sales for 24 consecutive years [1] Market Position - The company holds a market share of 19.3% in environmental equipment sales, ranking first in the industry [2] - In Q1 2025, the company achieved a revenue of CNY 31.82 billion, a year-on-year growth of 6.15%, with a net profit of CNY 1.81 billion, up 4.74% [3] - The company’s urban service projects reached a total of 262, with a total contract value of CNY 612.85 billion [1] Strategic Initiatives - The company is focusing on a "globalization, big product, digitalization" strategy, aiming to become a world-class leader in cleaning and maintenance equipment [4] - Plans to enhance the smart service sector by upgrading the intelligent cloud platform for digital management and exploring green recycling resource sorting [5] - The company is actively expanding its international market presence, with overseas orders increasing by 135% in 2024 [8] Technological Advancements - The company has developed the "Bee Swarm" intelligent cleaning robot system, achieving a 300% increase in operational efficiency [11] - The third-generation cleaning robot has reached L4 level autonomous driving capability, with plans for full market launch in 2025 [15] - The INFORE peak control intelligent management system has optimized energy consumption by approximately 20% and improved system efficiency by about 21% [18] R&D and Innovation - In 2024, the company invested CNY 3.17 billion in R&D, resulting in 160 core technologies, including 33 major disruptive technologies [16] - The company holds 1,316 valid patents, maintaining the industry lead in innovation [16] - The company’s new energy products cover over 40 categories and nearly 200 models, with a market share consistently above 30% [16] Environmental Impact - The company’s electric environmental vehicles sold 2,691 units in 2024, achieving a market share of 30.5% [17] - The company’s environmental equipment has been recognized for its contribution to sustainable urban management and environmental protection [1][2]

Core Insights - The trend of energy transition is significantly impacting the sanitation vehicle market, with an increasing number of electric and intelligent sanitation vehicles being deployed in cities [2][3] - The sales of new energy sanitation vehicles have shown remarkable growth, with a 43% year-on-year increase in early 2025, reaching a penetration rate of 14% [2][4] - Leading companies like Yingfeng Environment are capitalizing on this trend, reporting substantial sales growth and maintaining a dominant market share [2][6] Industry Overview - The sales of sanitation vehicles in China decreased by 5.6% in 2024, but new energy sanitation vehicle sales increased by over 55%, indicating a shift towards electric solutions [4][5] - Government policies are increasingly supporting the electrification of sanitation vehicles, with initiatives aiming to promote over 600,000 electric vehicles in public sectors [4][5] - The penetration rate of new energy sanitation vehicles is expected to rapidly approach 50% as the market matures [3][4] Company Performance - Yingfeng Environment has maintained its leadership in the industry, achieving a market share of 30.5% in 2024, with a significant increase in sales of new energy sanitation vehicles [2][6] - The company’s accounts receivable have shown stable growth, indicating a solid financial position despite challenges in the broader environmental sector [6][7] - The upcoming large-scale equipment update projects are expected to boost the sanitation industry significantly in 2025, supported by increased funding from government initiatives [6][7]

Group 1 - The sanitation vehicle market ended a four-year decline in Q1 2025, with a year-on-year sales increase of 3.5%, marking the first positive growth in recent years [1] - Sales of new energy sanitation vehicles surged to 2,384 units, a remarkable increase of 64% year-on-year, with a penetration rate of 15%, up by 5.7 percentage points compared to the same period last year [1] - Yingfeng Environment (000967) saw a year-on-year sales increase of 117% in Q1 2025, maintaining a 35% market share, which is 2.5 times that of the second-place competitor, solidifying its leading position in the industry [1] Group 2 - Yingfeng Environment has been the top seller of sanitation equipment for 24 consecutive years and is the largest manufacturer of single-brand sanitation equipment globally [1] - From 2022 to 2024, Yingfeng Environment ranked first in global production and sales of new energy sanitation vehicles for three consecutive years, maintaining the highest market share in new energy sanitation equipment [1] - The company leads in sales across eight categories of sanitation vehicles, including street sweepers, high-pressure cleaning vehicles, and dust suppression vehicles, showcasing its comprehensive product line leadership [1] Group 3 - Yingfeng Environment's performance is attributed to its comprehensive development of new energy equipment for cleaning, washing, and waste transfer since 2012, along with the deep integration of "technology + scenarios" [2] - Each product is designed to meet the specific needs of urban sanitation operations, providing efficient and low-carbon lifecycle solutions [2] - The company aims to capitalize on the critical window for the large-scale replacement of traditional fuel vehicles with new energy sanitation vehicles, aligning with the "3060 dual carbon" goals [2]

Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of RMB 12.25 [7][9]. Core Views - The company achieved a revenue of RMB 3.799 billion in 2024, representing a year-on-year increase of 30.67%, and a net profit attributable to shareholders of RMB 227 million, up 3.97% year-on-year, slightly below expectations due to increased market competition leading to a decline in gross margin [1][5]. - The company has a strong advantage in the new energy sanitation vehicle market, with a significant increase in sales, and is expected to see continued growth in performance and shareholder returns from 2025 to 2027 [1][5]. Summary by Sections Financial Performance - In 2024, the company reported a revenue of RMB 3.799 billion, a 30.67% increase year-on-year, and a net profit of RMB 227 million, which is a 3.97% increase year-on-year [1][6]. - The operating cash flow for 2024 was RMB 572 million, a substantial increase from RMB 36 million in 2023, primarily due to reductions in inventory and contract assets [4][6]. Market Position - The company’s sales of new energy sanitation vehicles grew by 77.4% year-on-year, with total sanitation equipment revenue reaching RMB 1.543 billion, a 17.2% increase [3][6]. - The penetration rate of new energy sanitation equipment reached 13.4%, up 5.3 percentage points year-on-year, indicating a growing acceptance of new energy technologies in the market [2][3]. Future Outlook - The company is expected to benefit from the ongoing trends of electrification and intelligence in sanitation vehicles, with projected EPS for 2025, 2026, and 2027 at RMB 0.49, RMB 0.57, and RMB 0.66 respectively [5][6]. - The report anticipates continued growth in new energy equipment sales from 2025 to 2027, contributing to long-term value for shareholders [1][5].