According to the Zhitong Finance APP, Shenwan Hongyuan released a research report stating that the municipal environmental protection industry has characteristics such as stable profitability and franchising. With the maturity of the industry, cash flow is improving (Capex decreasing and debt reduction promoting receivables collection), and the company's dividends are expected to continue to increase, with a number of high-dividend targets emerging in the municipal water and solid waste sectors. At the same time, as debt reduction progresses and the stability of environmental protection profitability becomes more prominent, the valuation of environmental dividend assets is expected to increase, coupled with the accelerated adjustment of water prices, highlighting the opportunities for environmental dividend assets. In addition, AI empowerment drives secondary growth, revitalizing new growth momentum in municipal environmental protection, with solid waste incineration + AIDC and unmanned sanitation becoming new growth points.
<h2>Shenwan Hongyuan's main viewpoints are as follows:</h2>
Municipal Environmental Protection: Stable Profitability, Improved Cash Flow + Debt Reduction Progress + Water Price Adjustment, Highlighting Opportunities for Environmental Dividend Assets
Municipal environmental protection has characteristics such as stable profitability and franchising. With the maturity of the industry, cash flow is improving (Capex decreasing and debt reduction promoting receivables collection), and the company's dividends are expected to continue to increase, with a number of high-dividend targets emerging in the municipal water and solid waste sectors. At the same time, as debt reduction progresses and the stability of environmental protection profitability becomes more prominent, the valuation of environmental dividend assets is expected to increase, coupled with the accelerated adjustment of water prices, highlighting the opportunities for environmental dividend assets. Recommended stocks include GUANGDONG INV, Yongxing Group, Hongcheng Environment, Hanlan Environment, Xingrong Environment, Green Power, Junxin Co., Ltd., and Conch Venture. In terms of debt reduction, it is recommended to pay attention to the sanitation sector companies such as Yuhua Tian and Qiaoyin Co., Ltd., which have a high proportion of accounts receivable and belong to the three guarantees sub-sector; as well as local state-owned enterprises in the water and solid waste sectors under significant regional fiscal pressure, such as Chengfa Environment, Wuhan Holdings, and Chuangye Environmental Protection; and companies like Mengcao Ecology and Dayu Water-saving with high accounts receivable and bad debt ratios.
AI Empowerment Drives Secondary Growth, Revitalizing New Growth Momentum in Municipal Environmental Protection
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<li>Solid Waste + AIDC: Significant advantages in energy consumption and location synergy, accelerating the integration process of computing and electricity. AIDC has huge potential, but its development faces multiple constraints such as energy consumption and land. Waste incineration is a scarce stable green electricity source, not included in the dual control assessment of energy consumption, and has obvious location advantages, which can effectively assist in the coordinated development of AIDC. AIDC can help improve both the profits and cash flow of waste incineration companies. In terms of profit enhancement: the green stable power provided by waste incineration is expected to increase compared to the current grid electricity price, and steam sales can also enhance profit performance. In terms of cash flow improvement: there are currently issues with national subsidies for some electricity fees from waste incineration, and as the business model shifts from ToG to ToB, the company's cash flow is also expected to improve. Taking a 1,000 tons/day waste incineration project matched with a 10MW data center as an example, in a direct energy supply model: AIDC increases the net profit of the waste incineration project by 83%, and ROE rises from 10% to 19%. In the energy supply + cabinet leasing model: AIDC increases the net profit of the waste incineration project by 146%, and ROE rises from 10% to 17%. Currently, SPD Environmental is leveraging waste incineration to create a benchmark for zero-carbon intelligent computing centers, and several companies such as Junxin Co., Ltd., Wangneng Environment, and Weiming Environmental Protection are rapidly advancing project implementation. Recommended waste incineration assets located in core cities include Junxin Co., Ltd., Yongxing Group, and Green Power, and attention is advised for Wangneng Environment and Weiming Environmental Protection</li>
<li>Solid waste + unmanned sanitation: Aging + AI resonance accelerates the arrival of unmanned sanitation. The number of sanitation and property management workers is approximately 8.75 million, with aging and rising labor costs driving the development of unmanned sanitation. Labor costs account for 60% of the operating costs of sanitation companies. Local policies actively encourage this, with Guangzhou planning to have 1,000 autonomous sanitation vehicles by 2026. Referring to the development prospects of unmanned logistics, the large-scale deployment of unmanned sanitation is expected. Currently, major companies such as Yingfeng Environment and Yuhua Tian are accelerating their layout in the sanitation robot field, promoting the digital transformation of urban services. It is recommended to actively invest in unmanned sanitation companies like Yingfeng Environment and Yuhua Tian, and to pay attention to Yutong Heavy Industry, Fulongma, and Qiaoyin Co., Ltd.</li>
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Risk Warning: Risk of adjustment in the company's dividend policy; risk of delayed government payments; risk of debt reduction progress not meeting expectations; risk of administrative approval and policy implementation not meeting expectations; risk of technological development in unmanned sanitation not meeting expectations

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Shenwan Hongyuan released a research report indicating that the municipal environmental protection industry has stable profitability and characteristics of franchise operations. As the industry matures, cash flow improves, and dividends are expected to increase. AI empowerment drives secondary growth in the industry, with solid waste incineration and unmanned sanitation becoming new growth points. It is recommended to pay attention to high-dividend targets such as GUANGDONG INV and Yongxing Group, while also suggesting to focus on the sanitation sector with a high proportion of accounts receivable and local water state-owned enterprises

Zhitong

Yongxing Group

GUANGDONG INV

CEVIA

XREC

YTHI

MCST

Dayu Irrigation

SWHY

Environment Protection

WANGNENG

QiaoYin

WHKG

GRANDBLUE ENV

INFORE ENVIRO

HONGCHENG ENVIRONMENT

CONCH VENTURE

WEIMING

Shenwan Hongyuan: The municipal environmental protection dividend attribute is strengthened, and artificial intelligence leads the sector's growth