Currently,Wangneng Environment has seen most of its waste-to-energy(WTE)projects put into operation.With stable waste incineration capacity,the company achieved organic growth through improving operational efficiency and optimizing business structure.For 1H25,the revenue/attributable net profit(NP)/recurring NP were RMB1,701/382/379mn(up 7.00/5.24/3.59%yoy).For 2Q25,revenue was RMB828mn(+2.98%yoy,-5.30%qoq),with an attributable NP of RMB181mn,(-0.15%yoy,-9.79%qoq).We attribute the qoq decline in revenue/NP to quarterly fluctuations in household waste intake.The interim DPS was flat yoy at RMB0.2.Maintain BUY,considering steady growth in household waste/kitchen waste disposal revenues and GPMs,and potential contributions from smart computing centers,heat supply,and overseas expansion.



Waste revenue steadily rose,resource recycling recorded loss

By business,1)household waste disposal revenue rose 3.50%yoy to RMB1,252mn with the GPM up 1.85pp yoy to 49.89%,contributing attributable NP of RMB428mn.2)Kitchen waste disposal revenue grew 6.69%yoy RMB211mn,with the GPM up 3.41pp yoy to 36.07%,delivering an attributable NP of RMB44.65mn.3)Rubber regeneration revenue was RMB104mn,with an attributable net loss(NL)of RMB19.76mn(vs revenue/NL:RMB73.59/18.04mn in 1H24).4)Battery recycling revenue was RMB18.03mn with an attributable NL of RMB20.23mn(vs revenue/attributable NL:RMB24.94/28.80mn in 1H24),as Zhejiang Lixin has halted production for post-closure handling.For 1H25,net operating cash flow rose 5.00%yoy to RMB624mn.We note the steady growth in household/kitchen waste disposal revenues and GPMs underpinned Wanneng’s operational performance and profitability.



Progress in smart computing centers,heat supply,overseas

1)The South Taihu project(2,150tpd processing capacity)completed registration for Huzhou’s‘Zero-carbon Smart Computing Center’on 4March 2025.It passed the expert review meeting for computing infrastructure by the provincial Development and Reform Commission in late May and is to be included in the provincial-level computing infrastructure planning project list.2)As of end-1H25,Wangneng has launched heat supply operations at 14 WTE projects,with total heat supply reaching 747.3kt in 1H25,up 24%+yoy.Also,Wangneng has signed aheat supply agreement with Xuchang City,committing to complete construction of supporting heating pipeline networks within the next 9months and achieve stable heat supply.3)On 29 May,Wanneng signed aPrinciple Contract for Household Solid Waste Treatment Services with Vietnam’s Thai Binh Province,planning to invest in,construct,maintain,repair and operate asolid waste incineration plant with minimum daily processing capacity of 600t.



Target Price of RMB21.39 on 15.5x 2025E PE,

We maintain 2025/2026/2027 attributable NP forecasts of RMB597/631/678mn.We assign 15.5x 2025E PE,at par with its peers'average on Wind consensus,for our target price of RMB21.39(previous:RMB17.80 based on 12.9x 2025E PE).



Risks:slower sales collection than we expect;delayed progress in lithium battery recycling;slower customer expansion in rubber regeneration business than we expect.