Soochow: Maintains a "buy" rating for DYNAGREEN ENV (01330), dividend still has potential for improvement.

Soochow released a research report stating that DYNAGREEN ENV (01330) is a model for increasing dividends and ROE in the solid waste sector. The current A-share dividend yield (ttm) is 4.1% and the Hong Kong stock dividend yield (ttm) is 6.3%. With the acceleration of national waste recovery and capital expenditures decreasing, free cash flow is increasing, and there is still potential for dividend growth. The company is actively expanding its heating supply and reducing costs, achieving dual growth in performance and ROE, and continuing to grow through equity incentives. The bank maintains a forecast of 650 million / 718 million / 760 million yuan for the company's net profit attributable to shareholders from 2025 to 2027, corresponding to a PE ratio of 10/9/9 times for Hong Kong stocks and a PE ratio of 16/14/13 times for A shares, maintaining a "buy" rating. Key points from Soochow: Net profit attributable to shareholders in Q1-3 of 25 increased by 24% year-on-year, and the weighted ROE increased by 1.27% to 7.57%. The company's revenue in Q1-3 of 25 was 2.582 billion yuan (up 1.49% year-on-year, up 0.38 billion yuan year-on-year, the same below), and net profit attributable to shareholders was 626 million yuan (up 24.39%, up 1.23 billion yuan), with a sales gross profit margin of 48.63% (up 3.19 percentage points) and a sales net profit margin of 25.10% (up 4.15 percentage points). The weighted ROE increased by 1.27% to 7.57%. In Q3 of 25, revenue for the quarter was 898 million yuan (up 1.64%, up 0.14 billion yuan), and net profit attributable to shareholders for the quarter was 249 million yuan (up 24.24%, up 0.49 billion yuan). Increased revenue: Doubling of heating supply, increase in waste volume and electricity sold driving revenue growth 1) Q1-3 of 25: Waste processing volume in Q1-3 of 25 was 10.92 million tons (up 2.00%), electricity generated was 3.867 billion kWh (up 1.17%), electricity sold was 3.206 billion kWh (up 1.46%), tons of electricity generated per ton of waste was 354 kWh (down 0.82%), tons of electricity sold per ton of waste was 294 kWh (down 0.53%), self-use electricity rate was 17.08% (down 0.24%), heating supply was 0.781 million tons (up 111.91%), and steam supply increased by 0.4162 million tons year-on-year. Calculated at a price of 150 yuan per ton of steam, the revenue from heating supply increased by 0.62 billion yuan. The company increased revenue by increasing capacity utilization and power generation efficiency, expanding heating supply, and increasing revenue while offsetting the decline in construction. 2) Q3 alone: Waste processing volume in Q3 of 25 was 3.7676 million tons (up 1.82%), electricity generated was 1.328 billion kWh (up 0.31%), electricity sold was 1.093 billion kWh (up 0.44%), tons of electricity generated per ton of waste was 352 kWh (down 1.49% year-on-year), tons of electricity sold per ton of waste was 290 kWh (down 1.35% year-on-year), self-use electricity rate was 17.67% (down 0.11 percentage points), and heating supply was 0.726 million tons (up 105.12%). Calculated at a price of 150 yuan per ton of steam, the revenue from heating supply increased by 0.21 billion yuan. Cost reduction: Reduction in operating costs, 25Q1-3 financial expenses decreased by 17% Operating costs in 25Q1-3 were 1.326 billion yuan (down 0.62 billion yuan), operating costs for Q3 were 476 million yuan (up 0.08 billion yuan), and expenses during 2025Q1-3 were 445 million yuan (down 11.33%, down 0.57 billion yuan), including financial expenses of 2.85 billion yuan (down 17.22%, down 0.59 billion yuan). Financial expenses in Q3 were 94 million yuan, down by 0.14 billion yuan year-on-year and slightly decreasing compared to the previous quarter. Acceleration of national waste recovery, 46% increase in free cash flow Net operating cash flow in 2025Q1-3 was 1.323 billion yuan (up 25.46%), mainly due to a significant increase in government subsidies in Q3 of 25. Credit impairment was -0.33 billion yuan in Q1-3 of 25 (down 0.15 billion yuan), with a credit impairment recovery of 0.13 billion yuan in Q3, compared to -0.05 billion yuan in the same period last year. Cash payments for the purchase and construction of fixed assets and intangible assets were 2.1 billion yuan in Q1-3 of 25 (down 28.11%), resulting in free cash flow of 11.13 billion yuan (up 45.98%), ensuring high dividends. Updated equity incentive plan, maintaining the steady growth assessment goals Considering that individual incentive recipients have left their positions, the company has adjusted the number of incentive recipients, the initial grant quantity, and the total grant quantity. The assessment goals continue the previous proposal of achieving a non-GAAP net profit attributable to shareholders of no less than 711 million/742 million/773 million in 26-28, corresponding to a non-GAAP compound annual growth rate of 10.9% in 24-26, with a 4.4%/4.2% non-GAAP growth rate in 27/28. Risk warning: Receivables risk, impairment risk of hazardous waste projects, unexpected increase in capital expenditures, etc. Overall, the company is performing well and is expected to continue its growth trajectory.