Gf Securities stated in a research report that the waste-to-energy sector is experiencing a Davis Double, characterized by simultaneous earnings growth and valuation expansion. Slag, which contains metals such as copper, gold, and silver, is undergoing value reassessment amid rising metal prices. Steam supply for heating benefits from tightening carbon constraints and increasing industrial demand, offering both low-cost advantages and high operational flexibility. The firm calculated that under the scenario of "slag prices increasing by 100 RMB per ton with full external sales, and a 10% steam supply ratio at a price of 200 RMB per ton," the average earnings potential for 12 listed waste-to-energy companies could reach 44%, based on projected 2025 net profits. This is expected to become a sustained source of performance for these companies.

Furthermore, waste-to-energy serves as a "green baseload power source," providing stable electricity supply and proximity to load centers, making it highly compatible with the requirements of AIDC. Starting from a low valuation base of 7-15x P/E for A-shares and 5-8x for H-shares based on 2026 estimates, the earnings enhancement from slag utilization, heating supply, and computing-power synergy, combined with potential dividend increases, positions the waste-to-energy industry for a Davis Double. Key viewpoints from Gf Securities are as follows:

Computing-Power Synergy: High-Quality HOLA Assets Undergoing Valuation Rethink This year's Government Work Report included "computing-power synergy" as a national strategy for the first time. In the AI era, the strategic importance of green energy is escalating, driving strong demand for stable, locally-sourced, low-cost green power. Waste-to-energy offers several advantages: (1) It qualifies as genuine green power with full green certificates, meeting IDC requirements for green electricity share; (2) It provides 24/7 stable generation, acting as a "baseload thermal power" within green energy sources; (3) Locations in urban suburbs naturally align with zero-carbon parks and AIDC needs; (4) Projects like Shanghai Liming have already received approval, with leading companies actively advancing initiatives. Leveraging their core waste-to-energy operations, companies are accelerating the filing, construction, and partnerships for integrated computing-power projects. These assets combine stable earnings, high dividends, and low valuations, representing a significantly overlooked segment for computing-power synergy within the green power sector.

Slag Resource Utilization: Metal Price Rises Drive Earnings Potential Significant increases in non-ferrous metal prices are reshaping the pricing structure for slag. Current external sale prices for slag generally range from only 10-40 RMB per ton, yet the calculated value of metals recovered after sorting and processing exceeds 550 RMB per ton, indicating underestimated resource value. Leading companies are beginning to capture pricing benefits; for instance, Shengyuan Environmental Protection completed a comprehensive re-tendering for slag in 2025, raising average prices to 120-130 RMB per ton, with some projects exceeding 200 RMB per ton. The analysis estimates that a 100 RMB per ton increase in slag prices, assuming full external sales, could boost profits for listed companies by an average of 25%. This is expected to evolve into a stable profit stream as metal prices trend higher.

Steam Supply for Heating: A Cost-Effective Green Energy Source Supporting Carbon Reduction Steam generated from waste-to-energy utilizes solid waste as feedstock, inherently offering emission reduction benefits. Its green value is increasing amid stricter carbon constraints. Revenue-wise, processing one ton of waste can produce approximately two tons of steam. If used for power generation, the revenue is about 220 RMB per ton; if sold directly as steam at around 200 RMB per ton, revenue can reach approximately 400 RMB per ton, about 1.8 times that of power generation, with improved payment terms and more stable cash flow. Compared to natural gas and coal-fired heating, waste-to-energy steam holds cost advantages and supply stability. Profit-wise, retrofitting for heating supply requires minimal additional capital expenditure, yielding high marginal returns: assuming a 10% heating supply ratio, project net profits could increase by approximately 28% compared to pure power generation; increasing this ratio to 15% could enhance profits by over 40%.

Risk warnings include orders and new business developments falling short of expectations, potential policy changes, and lower-than-anticipated dividends.