Zhitong Finance App learned that on the evening of March 26, Yuefeng Environmental (01381), a leading domestic waste incineration power generation company and comprehensive urban environmental and health service provider, released its 2023 performance report. In 2023, Yuefeng Environmental Protection will actively respond to complex external environmental changes, continuously improve production efficiency and technical level, improve quality and efficiency, and highlight resilience in operations.

Positive cash flow, increased gross profit, and significant improvement in operational quality and efficiency

Yuefeng Environmental Protection's annual revenue was HK$4.98 billion. Since most waste incineration power generation projects have been put into operation, project construction revenue declined by 76.7%. If construction revenue factors were excluded, the Group's operating income increased 1.6% year on year; due to rising interest expenses due to increased overseas interest rates and RMB exchange rate factors, the Group's net profit fell 24.9% year on year to HK$1,021 billion; after construction revenue with low gross margin was drastically reduced, the Group's gross operating margin rose from 30.7% to 41.8%, and profit quality improved significantly.

It is worth noting that Yuefeng Environmental's financial situation became more stable during the year. Thanks to the successive commissioning of incineration and power generation projects, the Group's operating cash flow reached HK$1,079 billion, achieving a significant improvement in cash flow. As the core business shifts from the construction cycle to the operation cycle and the hematopoietic capacity of the core business increases, the Group's operating cash flow is expected to continue to perform well to ensure the long-term sustainable development of Yuefeng Environmental Protection.

The core business location layout is excellent, and the operating efficiency is superior to the industry

Waste incineration power generation is an effective way to reduce carbon emissions. Driven by policies, the industry has experienced a period of rapid development for ten years and has reached a mature stage. In 2023, the domestic production and life order is still recovering. Yuefeng Environmental Protection achieved revenue of HK$3.43 billion from electricity sales and garbage disposal, which is basically the same as the previous year, showing the resilience of production and operation.

Currently, Yuefeng Environmental Protection has 36 signed waste incineration power generation projects, with a total daily urban domestic waste treatment capacity of 54,540 tons; 33 of its projects have been put into operation, with a daily urban domestic waste treatment capacity of 43,690 tons, making it the largest private waste incineration power generation enterprise in China.

At the same time, the Group's project layout is excellent. In Guangdong Province, where demand for incineration of urban domestic waste is huge, the group has laid out 17 projects, with a total production capacity of 26,790 tons/day, accounting for 49% of the total production capacity. Currently, the business covers 12 provinces including Guangdong, Shanghai, Sichuan, Shandong and Jiangsu.

Relying on location advantages and refined operation methods, the operating parameters of the Group's waste incineration power generation business are significantly ahead of peers. The overall capacity utilization rate is over 100%, and the plant electricity consumption rate is less than 14%, which is lower than the industry average of 15% to 20%; in terms of waste treatment costs, the average value of the group project reached 85 yuan/ton, and the average project value in Guangdong Province reached about 100 yuan/ton, which is about 10% higher than the industry average, and the overall operating efficiency remains at a high level.

According to annual data, the Group's harmless waste disposal volume reached 16.615,700 tons, up 18.7% year on year; incineration power generation reached 6.218 billion kilowatt-hours, up 18.4% year on year, which is equivalent to saving 1.623 million tons of standard coal and reducing carbon dioxide emissions by 862.1 million tons, effectively helping the country cope with climate change and achieve the “double carbon” target. Furthermore, the Yuefeng Environmental Yingkou Waste Incineration Power Generation Project has obtained registration approval to certify carbon emission reduction standards. It is expected to reduce carbon dioxide emissions by 245,000 tons per year, an important step in the Group's carbon asset development.

The Hong Kong market achieved a breakthrough, and the second growth curve accelerated

In recent years, Yuefeng Environmental Protection has actively built a second growth curve. While deepening the waste incineration power generation business, it has expanded and innovated the “incineration +” business strategy, exploited the terminal advantages of urban domestic waste incineration, actively promoted the extension of the industrial chain, and expanded the layout of asset-light businesses with growth potential, such as integrated sanitation.

In 2023, Yuefeng Environmental Protection successfully entered the Hong Kong market, taking an important step in the layout of the Guangdong-Hong Kong-Macao Greater Bay Area. The Group obtained its first Hong Kong regional contract in July. The value of this contract is HK$2,818 million. The Group-led Guangdong Feng-Baohua Joint Venture was awarded the second phase (10-year term) contract for the Hong Kong North Lantau Waste Transfer Station and Outlying Islands Waste Transfer Facility.

According to reports, Yuefeng Environmental Protection officially took over the operation of the project in March of this year and carried out renovation and upgrading of existing facilities to enhance treatment efficiency and provide reliable, advanced and innovative waste management services. The Group is expected to open up the Hong Kong market through this project and open a new chapter in the development of the environmental protection industry chain in Hong Kong.

In 2023, the scale of Yuefeng's environmental protection and sanitation business increased by more than 50%. Since 2023, the total contract amount has exceeded 8 billion yuan. Among them, the Quyang County project in Hebei Province became the first project in the Group's sanitation business to exceed 3 billion yuan, demonstrating the market's recognition of the Group's business strength.

Looking forward to the future, as the “incineration +” development strategy continues to advance, Yuefeng Environmental Protection, while maintaining the steady development of its core business, waste incineration power generation, will actively expand upstream and downstream businesses, deepen and upgrade integrated sanitation services in all aspects, and strengthen the synergy of various businesses, which is expected to continue to inject strong impetus into the Group's future performance growth.