Key takeaway

In 1H26, the company generated operating revenue of RMB1.154bn, up 36.05% YoY; net profit attributable to the parent company reached RMB228mn, up 16.03% YoY; quarterly net profit attributable to the parent company reached RMB142mn, up 19.51% YoY. The company's steady earnings growth in 1H26 was mainly driven by the continued increase in municipal solid waste treatment capacity and the consolidation of the Pingnan project in April 2026. In terms of period expense ratios, the company’s selling expense ratio, administrative expense ratio, R&D expense ratio, and financing expense ratio were 0.45%, 5.73%, 2.00%, and 3.78%, respectively, with YoY changes of - 0.23 pcts, -2.07 pcts, -0.67 pcts, and -0.04 pcts. Regarding dividends, the company plans to distribute RMB103mn for the 2026 interim period, accounting for 45.24% of its net profit attributable to the parent company for the period. As of end-June 2026, the company had secured municipal solid waste treatment capacity of 19,700 tons/day, including 12,400 tons/day in operation and 2,600 tons/day under construction. In 1H26, the company processed 2.2851mn tons of municipal solid waste, up 6.97% YoY; generated 629mn kWh of ongrid electricity, up 18.90% YoY; and supplied 937,900 tons of heat, up 6.88% YoY.

Event

The company released its 1H26 earnings results

In 1H26, the company recorded operating revenue of RMB1.154bn, up 36.05% YoY; net profit attributable to the parent company reached RMB228mn, up 16.03% YoY; quarterly net profit attributable to the parent company reached RMB142mn, up 19.51% YoY; weighted average ROE was 6.03%, up 0.66 pct YoY; and basic EPS reached RMB0.15 per share, up 16.05% YoY.

Quick Take

Capacity growth drives operating performance, while the 1H dividend delivers stable returns

In 1H26, the company generated operating revenue of RMB1.154bn, up 36.05% YoY; net profit attributable to the parent company reached RMB228mn, up 16.03% YoY; quarterly net profit attributable to the parent company reached RMB142mn, up 19.51% YoY. The company’s performance grew steadily in 1H, mainly due to the steady increase in municipal solid waste treatment capacity and the consolidation of the Pingnan project (Phase I: 600 tons/day) in April 2026. In terms of period expense ratios, the company’s selling expense ratio, administrative expense ratio, R&D expense ratio, and financing expense ratio were 0.45%, 5.73%, 2.00%, and 3.78%, respectively, with YoY changes of -0.23 pcts, -2.07 pcts, -0.67 pcts, and -0.04 pcts. Regarding dividends, the company plans to distribute RMB103mn for the 2026 interim period, accounting for 45.24% of its net profit attributable to the parent company for the period.

New projects won in August, with capacity under contract continuing to grow

As of end-June 2026, the company had secured municipal solid waste treatment capacity of 19,700 tons/day, including 12,400 tons/day in operation and 2,600 tons/day under construction. In 1H26, the company processed 2.2851mn tons of municipal solid waste, up 6.97% YoY; generated 629mn kWh of on-grid electricity, up 18.90% YoY; and supplied 937,900 tons of heat, up 6.88% YoY. In addition, the company actively developed green and low-carbon businesses and supply chains, and processed a total of 62,400 tons of food waste, sludge, and medical waste through coordinated operations. In terms of project development, the company successfully won the bid for the municipal solid waste incineration power generation project (800 tons/day) in Houma, Shanxi Province, in August 2026, further expanding its project pipeline. Regarding projects under construction, the company is actively advancing the orderly construction of the Shijiazhuang heating upgrade project, Hengyang project, Teng County project, and Jiangyou project, which are expected to commence operations from 2026 to 2028, respectively. The Yuxi food waste project (50 tons/day) commenced trial operations in June. Once operational, it will enable the resource recovery of waste oils and fats, providing upstream feedstock support for the biomass energy industry.

Acquisitions and projects under construction drive capacity growth; initiate coverage on the company with a “Buy” rating

In the short term, the company’s waste treatment capacity and operating results are expected to maintain growth through external M&A and the self-development of projects in its pipeline; in the medium to long term, backed by the Chinese Academy of Sciences, the company serves as a green energy technology commercialization platform driven by technological innovation within the system of Chinese Academy of Sciences Holdings Co., Ltd. We forecast its net profit attributable to the parent company to reach RMB451mn, RMB575mn, and RMB681mn in 2026, 2027, and 2028, respectively, implying EPS of RMB0.31, RMB0.39, and RMB0.46. We assign a “Buy” rating.

Risks

Lower-than-expected capacity utilization improvement: Currently, some of the company's capacity has not yet commenced operation. If the post-operation capacity utilization rate rises slower than expected, the growth of operating performance may be weaker.

Falling waste disposal prices: the prices of the company's waste disposal projects need to be reviewed regularly. If the unit price of waste disposal falls due to government fiscal or policy issues, the company's profit growth may be lower than expected.

Changes in tax preferential policies: The company currently enjoys preferential policies in terms of valueadded tax, corporate income tax, etc. If subsequent preferential policies expire or change, the company's tax expenditure will increase and the growth of operating performance may be lower than expected.