Jinwu Financial News | Sino-Thai International released a research report that the total revenue of Yuefeng Environmental Protection (01381) FY23 fell 39.6% year on year to HK$4.98 billion, and the overall gross margin of the company rose from 30.7% to 41.8%, higher than the forecast of 40.1%. The gross margin of the FY23 construction business was 15.3%, far lower than 46.6% of the waste treatment and power generation business. Shareholders' net profit fell 24.8% year on year to 1.0 billion yuan, which is only 8.6% lower than the forecast of 1.1 billion yuan.
According to the bank, after years of development, the company's waste-to-energy business has taken shape, and the trend of production capacity growth has slowed in recent years. FY23's sanitation business accelerated development. Revenue rose 50.7% year on year to 340 million yuan, and its share of total revenue increased 4.1 percentage points to 6.9% year on year. We expect our share of revenue to reach 9.0% in 2025. Although the sanitation business does not contribute much to short-term revenue, it can expand the company's revenue stream in the long run.
The bank continued that in response to FY23 results, the company's FY24-25 shareholders' net profit forecast was lowered by 2.8% and 10.3% respectively, and the target price was adjusted accordingly from HK$4.50 to HK$4.40, corresponding 8.5 times the target price-earnings ratio for 2024 and 10.3% room for growth, maintaining the “gain” rating.