DYNAGREEN ENV (01330) exemplifies the solid waste sector’s dividend growth and ROE improvement thesis, with its A-share trailing dividend yield at 4.1% and H-share yield at 6.3%. Accelerated government subsidy recoveries and reduced capital expenditures are boosting free cash flow, supporting further dividend upside. The company is actively expanding heating supply while optimizing costs, driving both earnings and ROE higher. Its newly issued equity incentive plan further secures sustained growth.

Soochow Securities maintains its 2025–2027 net profit forecasts at RMB650 million, RMB718 million, and RMB760 million, translating to H-share P/E multiples of 10x, 9x, and 9x, and A-share multiples of 16x, 14x, and 13x, respectively. The "Buy" rating is reiterated.

**Key Highlights:** - **Strong Earnings Beat:** 25Q1–3 net profit rose 24% YoY to RMB626 million, with weighted ROE up 1.27pp to 7.57%. Revenue reached RMB2.582 billion (+1.49% YoY), gross margin improved 3.19pp to 48.63%, and net margin expanded 4.15pp to 25.10%. - **Q3 Performance:** Q3 revenue grew 1.64% YoY to RMB898 million, while net profit jumped 24.24% to RMB249 million.

**Revenue Drivers:** 1. **Jan–Sep 2025:** Waste processing volume rose 2% to 10.92 million tons, power generation edged up 1.17% to 3.867 billion kWh, and heating supply surged 111.91% to 788,100 tons. Higher capacity utilization and efficiency gains offset construction declines. 2. **Q3 2025:** Waste processing increased 1.82% to 3.768 million tons, while heating supply more than doubled (+105.12% YoY), contributing an estimated RMB21 million in incremental revenue.

**Cost Optimization:** - Operating costs fell by RMB62 million in 25Q1–3, with financial expenses down 17.22% YoY to RMB285 million. Q3 financial expenses dropped RMB14 million YoY.

**Cash Flow Strength:** - Operating cash flow surged 25.46% YoY to RMB1.323 billion in 25Q1–3, driven by faster subsidy collections. Free cash flow jumped 45.98% to RMB1.113 billion, underpinning dividend sustainability.

**Equity Incentive Update:** - The company adjusted grant sizes due to employee departures but retained its 2026–2028 targets: adjusted net profit of at least RMB711 million, RMB742 million, and RMB773 million, implying a 10.9% CAGR (2024–2026) and 4.4%/4.2% growth in 2027/2028.

**Risks:** Receivables exposure, impairment risks in hazardous waste projects, and unexpected capital expenditure increases.