Summary of Longking Environmental Conference Call Company Overview - **Company**: Longking Environmental - **Industry**: Environmental Protection and Renewable Energy Key Points and Arguments Financial Performance - Longking Environmental reported a significant improvement in Q2 performance with a year-on-year growth of 12%, indicating an upward trend in performance despite a decline in revenue and profit in Q1 due to order completion confirmation [2][4] - For the first three quarters of 2025, the company achieved an 18% increase in revenue and a 20.5% increase in net profit attributable to shareholders, with Q3 net profit showing a remarkable 55% year-on-year growth [4] Business Segments - The green electricity business has emerged as a new growth driver, with the Tibet Lagocuo project being a major contributor. The Heilongjiang Datong project is expected to start contributing in Q4, becoming a key growth engine for the next two years [2][5] - The flue gas treatment segment saw new orders of 7.6 billion yuan in the first three quarters of 2025, a 1% year-on-year increase, with a total backlog of 19.7 billion yuan, reflecting a stable order structure [6] Strategic Initiatives - The company has successfully turned around its energy storage business from loss to profit after collaborating with Yiwei, achieving full production capacity and profitability in the first half of the year [2][5] - Longking is actively exploring new business directions, including sodium-ion batteries, solid-state batteries, carbon capture and storage (CCS), and hydrogen energy, with sodium-ion battery samples developed and potential customer certifications obtained [2][7] Future Projections - Profit forecasts for Longking Environmental are 1.1 billion yuan in 2025, 1.4 billion yuan in 2026, and 1.7 billion yuan in 2027, representing a compound annual growth rate of 26.8%. A valuation of 15 times earnings suggests a future market capitalization of 21.5 billion yuan next year and 25.5 billion yuan the following year [2][8] - The company’s green electricity projects, including the Congo hydropower project expected to be operational by 2029, are anticipated to provide additional performance increments [8] Long-term Investment Value - Longking Environmental demonstrates strong problem-solving capabilities and a clear market positioning, which enhances its long-term investment value. The company is not only focused on stable development but also on continuously exploring new growth points, such as sodium-ion and solid-state batteries, alongside its expanding green electricity and energy storage businesses [3][9]

Investment Rating - The investment rating for the company is "Buy" and it is maintained [9]. Core Insights - The company reported a significant increase in Q3 performance, with revenue reaching 3.175 billion yuan, a year-on-year increase of 60.16%, and a net profit attributable to shareholders of 335 million yuan, up 54.99% year-on-year. The growth was driven by contributions from flue gas treatment, green electricity, and energy storage businesses [2][6]. - For the first three quarters, the company achieved a total revenue of 7.858 billion yuan, representing an 18.09% year-on-year increase, and a net profit of 780 million yuan, up 20.53% year-on-year [6]. - The company is actively expanding into new areas such as sodium-ion batteries, with stable order sizes in flue gas treatment and strong performance in energy storage sales [2][6]. Summary by Sections Revenue and Profitability - Q3 revenue was 3.175 billion yuan, a 60.16% increase year-on-year, with a net profit of 335 million yuan, up 54.99% [2][6]. - The first three quarters saw total revenue of 7.858 billion yuan and net profit of 780 million yuan, reflecting growth of 18.09% and 20.53% respectively [6]. Business Contributions - The flue gas treatment, green electricity, and energy storage sectors all contributed positively to revenue [2]. - Green electricity projects have been operating steadily, contributing nearly 170 million yuan in net profit for the first three quarters [2][6]. - Energy storage sales have shown strong performance, with cumulative deliveries of energy cells reaching 5.9 GWh, primarily for export [2][6]. Financial Health - The company reported a net operating cash flow of 764 million yuan for the first three quarters, continuing the trend from the first half of the year [2]. - As of the end of Q3, the company had cash reserves of 2.19 billion yuan, indicating a strong liquidity position [2][6]. - The debt-to-asset ratio was 62.0%, down 6.89% year-on-year, with a low interest-bearing debt ratio of 16.9% [2][6]. Future Outlook - The company is expected to achieve net profits of 1.103 billion yuan, 1.408 billion yuan, and 1.705 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 32.8%, 27.7%, and 21.0% [2][6]. - The company is also expanding its project portfolio in green electricity and energy storage, with ongoing developments in various international projects [2][6].

Summary of Longking Environmental Conference Call Company Overview - Longking Environmental maintains a leading position in the flue gas treatment industry with a desulfurization and denitrification market share of nearly 20% and a dust removal market share of 50% [2][6] - The company generates approximately 10 billion in new orders annually, primarily through the EPC model, serving industries such as power, steel, and cement [2][4] Key Points Market Position and Performance - Longking Environmental's order situation is robust, with a 13.6% year-on-year increase in new orders in Q1 2025, totaling over 19 billion [2][8] - The company has a strong competitive advantage in the flue gas treatment sector, evidenced by stable order growth and increasing market share [5][6] Financial Performance and Projections - The company expects to achieve a profit of approximately 11 billion in 2025, with contributions from various segments: 9.7 billion from environmental services, 2 billion from green electricity, and a small profit from energy storage [21] - For 2026, the projected profit is around 14 billion, driven by continued growth in green electricity projects and stable performance in core environmental services [22] Impact of Major Shareholder - Zijin Mining becoming the controlling shareholder has positively impacted Longking Environmental by providing financial support and enhancing order quality, leading to improved profit margins [2][7][8] Green Electricity Projects - The green electricity projects are progressing well, with several entering commercial operation, expected to contribute 2 billion in profit in 2025 [2][11] - Notable projects include the Tibet Lagocuo project, which is anticipated to yield stable profits due to its favorable operational conditions [13] Hazardous Waste Treatment Challenges - The hazardous waste treatment segment faced operational losses in 2024, but improvements are expected in the second half of 2025 through operational collaborations to enhance capacity utilization [9][10] Energy Storage Business - The energy storage segment is projected to turn profitable in 2025 after a loss of approximately 70 million in 2024, aided by partnerships and operational improvements [14] Financial Management and Risk Control - Longking Environmental emphasizes cash flow management, maintaining positive operating cash flow and manageable debt levels [3][17] - The company has implemented long-term equity incentives and a dividend policy to attract institutional investors [18] Market Valuation - The company is expected to reach a market value of 21 billion by 2026, based on a projected compound growth rate of around 30% and a price-to-earnings ratio of 15 [23] Additional Insights - The company’s strategic partnerships, such as with Yiwai for battery cell sales, are expected to enhance operational efficiency and profitability [14] - The collaboration with Jitai Intelligent, focusing on wall-climbing robots for equipment maintenance, is seen as a thematic growth opportunity, albeit with limited immediate financial impact [16]