维尔利(300190) Maintain BUY rating with target price of RMB6.63 According to its announcement released on 14 December, WELLE Environmental(WELLE) has won the landfill leachate treatment bids of Changchun MunicipalSolid Waste Treatment Center and Daxin landfill project in Shenyang. Specializingin organic waste recycling and industrial energy conservation, the company hasaccumulated extensive expertise in projects, technological advancements andcustomer resources. We maintain 2023E/2024E/2025E EPS atRMB0.07/0.17/0.30. Given the company’s leading technology, successfuloperational track record, and our optimism regarding heightened acquisition andexecution of engineering orders, as well as its great earnings upside potential, wevalue the stock at 39.0x 2024E PE, a premium over its peers’ Windconsensus-based average of 26.0x. Our target price is RMB6.63 (previous:RMB5.10). Maintain BUY. Specializing in landfill leachate treatment, major orders secured The leachate treatment project of Changchun Municipal Solid Waste TreatmentCenter, which WELLE estimated to worth RMB171mn, involves WELLE providingleachate treatment facilities with a capacity of no less than 1,000 tonnes/day (peaktreatment capacity: 1,500 tonnes/day). Furthermore, WELLE will handle theinstallation, commissioning, operation and post-service facility dismantling. Thecontract will span three years and be renewed annually, at a bid-winning price ofRMB155.98/tonne. Additionally, the concession project for the temporary leachatetreatment facilities at the Daxin landfill site, which WELLE value at RMB292mn,tasks WELLE with constructing temporary leachate treatment facilities (capacity:1,400-tonne/day), with a contract fulfilment period of 4.5 years and bid-winningprice of RMB126.98/tonne. Equity transfer to optimizing asset structure and boost cash flow According to the announcements of WELLE and Xingrong Environment (Xingrong)released on 18 November, WELLE proposes to transfer 100% stake in WELLEXi'an to Xingrong, at a price of RMB283mn. WELLE Xi'an is a kitchen-wasteconcession project. The Phase I project involves kitchen-waste/waste greasetreatment capacity of 200/20 tonnes per day, with a concession period of 30 years(2016-2046). The Phase II project involves kitchen-waste treatment capacity of200 tonnes/day and a concession period of 26 years (2020-2046). With stableoperations, WELLE Xi'an posted revenue/net profit of RMB56.75/9.95mn in10M23, and had net assets of RMB178mn as of 31 October, corresponding to 1.6xPB for the equity transfer. As of 30 September, WELLE holds monetary fundsamounting to RMB546mn. We anticipate this equity transfer to optimize its assetstructure and boost cash flow. Risks: slower execution of engineering projects than we expect; slower ramp-up ofleachate and kitchen-waste treatment orders than we expect.