Through technological innovation, industrial chain collaboration and market expansion, Luhai Environmental Protection has achieved an important profit turning point in 2024, marking the maturity and sustainability of its business model. With policy support and continued growth in market demand, Luhai Environmental Protection is expected to continue to maintain a rapid growth trend in the future and further enhance its market influence in the renewable resources industry.

Xiamen Luhai Environmental Protection Co., Ltd. (hereinafter referred to as "Luhai Environmental Protection", code "834562") , a company listed on the New Third Board, released its 2024 annual report. In 2024, Luhai Environmental Protection achieved operating income of 124 million yuan , a year-on-year increase of 81.67%, and net profit of 1.2114 million yuan, an increase of 112.86% over the same period last year.

Previously, Luhai Environmental Protection had been in the red for five consecutive years: from 2019 to 2023, Luhai Environmental Protection's net profit attributable to the parent company was -2.0721 million yuan, -45.1542 million yuan, -8.3506 million yuan, -18.4302 million yuan and -9.4222 million yuan respectively. In 2024, Luhai Environmental Protection finally turned losses into profits!

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Introduction to Luhai Environmental Protection

Founded in 2000 with a registered capital of RMB 70.36 million, Luhai Environmental Protection is a high-tech enterprise focusing on waste resource recycling, sorting and comprehensive utilization. The company was listed on the New Third Board in 2015 with the stock code 834562 , and is the first listed company in the field of "urban resource recycling and application system services" on the New Third Board. With more than 20 years of experience in the circular economy, Luhai Environmental Protection is positioned as a new era domestic waste resource recycling operator. Its business focuses on the large-scale recycling, sorting and recycling of recyclable domestic waste materials, and provides domestic waste resource recycling operation services for cities.

Luhai Environmental Protection is a national high-tech enterprise, a "green manufacturing system solution provider" of the Ministry of Industry and Information Technology of the People's Republic of China, and one of the first batch of standardized enterprises in the waste plastic processing and utilization industry recognized by the Ministry of Industry and Information Technology of the People's Republic of China. It has a national resource recycling base, holds more than 40 patents, and participates in the compilation of many national standards. The independently developed low-value recyclable intelligent sorting process technology has successfully solved the key technical problems in the industry. This technology has been iteratively completed since 2022. The first low-value recyclable intelligent sorting production line in China was put into production, opening up the value conversion channel from low-value recyclables of domestic waste to renewable resources. It has taken the lead in realizing the industrialization breakthrough of low-value recyclable intelligent sorting technology in China, and has formed a "Luhai model" to provide an effective solution for the large-scale recycling and utilization of nearly 100 million tons of low-value recyclables in the country each year.

Luhai Environmental Protection takes " intelligent sorting + flexible manufacturing" as the dual engines of technological innovation, and has a national business layout of "1+2+N" , namely 1 national resource recycling base, 2 intelligent sorting systems and N urban intelligent sorting centers. At the same time, a two-way traceable value chain management system from the garbage recycling end to the recycled product client has been established. While ensuring the stable delivery of products, costs are effectively controlled, and the product gross profit margin has been increased to 10.34% , which has enabled Luhai Environmental Protection to gain market competitive advantages in both technology and cost, and set a benchmark for technological innovation in the industry.

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From 2015 to 2017, the performance has grown steadily

2019-2023, 5 consecutive years of losses

01

From 2015 to 2017, the performance maintained steady growth

Luhai Environmental Protection's performance maintained steady growth during 2015-2017, with net profits of RMB 7.6241 million, RMB 11.5252 million and RMB 12.5279 million respectively . The steady growth during this period was mainly due to the following factors:

1. Stable main business

At that time, Luhai Environmental Protection was mainly engaged in the comprehensive processing and reuse of aluminum-plastic composite materials, paper-aluminum-plastic and paper-plastic, producing products such as recycled plastic rice, recycled paper pulp and recycled aluminum chips, which accounted for the main part of the company's revenue.

2. Technical and market advantages

The company is the first domestic enterprise to obtain formal approval to import and process aluminum-plastic composite film. With advanced recycling and processing technology, it can meet the differentiated needs of different customers around the world and has established long-term and stable cooperative relationships with many internationally renowned companies.

3. Good market environment During the period of 2015-2017, the overall development of the recycling industry in which the company is located was relatively stable, the market demand was strong, and the comprehensive gross profit margin of products increased from 18.23% in 2015 to 10.65% in 2017, which promoted the growth of the company's performance.

02

2019-2023, 5 consecutive years of losses

Luhai Environmental Protection has been in the red for five consecutive years from 2019 to 2023, with net profits attributable to the parent company of -2.0721 million yuan, -45.1542 million yuan, -8.3506 million yuan, -18.4302 million yuan and -9.4222 million yuan respectively. The main reasons are as follows:

1. Strategic transformation and R&D investment Luhai Environmental Protection began to transform in 2017, focusing on the field of recyclable household waste and building a full industrial chain model of "recycling-sorting-resourceization-high-value application". During the transformation process, the company invested a lot of money in technology research and development, including intelligent sorting technology, complete equipment research and development, and renewable resource application. Although these R&D investments have laid the foundation for the company's long-term development, they have increased costs and compressed profit margins in the short term. 2. Insufficient production capacity and business adjustments During the transformation period, the company upgraded and renovated its factories, resulting in insufficient production capacity and unable to give full play to the scale effect. In addition, in the early stages of the company's operations under the new business model, market promotion and customer accumulation took time, and revenue growth failed to cover the initial investment. 3. Impact of the market and economic environment Affected by the overall economic environment and the COVID-19 pandemic, domestic consumption and industrial production were hit, the recycling business of renewable resources stagnated, and commodity prices plummeted, resulting in the company's product gross profit margins being meager. At the same time, the unstable supply of raw materials also affected the company's production efficiency. 4. Changes in industry policies In 2017, the General Office of the State Council issued the "Implementation Plan for Prohibiting the Entry of Foreign Waste and Promoting the Reform of the Solid Waste Import Management System", which restricted the import of some raw materials and impacted Luhai Environmental Protection's original business model. The company had to adjust its business direction and focus on the domestic low-value recyclables market, but faced many challenges in the early stages of the transformation. 5. Financial and operational pressure During the transformation period, the company faced great financial pressure, including increased R&D investment, insufficient production capacity, and rising market development costs. These factors led to the company's continued losses during 2019-2023. 6. Industry competition and market development During the transformation process, Luhai Environmental Protection needs to establish competitive advantages in new market segments and cooperate with local governments and enterprises to promote the low-value recyclables sorting center project. In the early stages of market development, the company needs to invest a lot of resources, which also has an impact on short-term performance. In summary, Luhai Environmental Protection's five consecutive years of losses are the result of the combined effect of multiple factors, including strategic transformation, R&D investment, changes in the market environment, industry policy adjustments, and operational pressure. However, as the company's industrial chain gradually took shape and its technological advantages became apparent, the company successfully turned losses into profits in 2024, demonstrating the effectiveness of its transformation strategy.

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Growing against the trend

Successfully achieve profitability inflection point in 2024

In 2024, Luhai Environmental Protection reached a critical turning point and achieved a major breakthrough from loss to profit. According to the latest annual report, the company's revenue exceeded 100 million yuan for the first time, and its net profit also turned positive. This achievement is a concentrated reflection of the company's strategic transformation and innovative practice. Luhai Environmental Protection has expanded to the upstream of the industrial chain, increased R&D investment, and continued to consolidate its core competitiveness, laying a solid foundation for the long-term development of the company.

Amid complex economic conditions, fluctuations in raw material prices and fierce market competition, Luhai Environmental Protection has optimized operational efficiency, improved cost structure and ultimately achieved profit reversal through multiple measures including technological innovation, model innovation and industrial chain collaboration . This not only marks the maturity of the company's business model, but also demonstrates its strong potential for sustainable development.

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Multi-dimensional advantages lay a solid foundation for development

1. Technology leadership, building core competitiveness In recent years, Luhai Environmental Protection has continuously increased its R&D investment in intelligent sorting process technology, and R&D expenses in 2024 will increase by 30%+ year-on-year . Continuous R&D investment has enabled the company to build a dual-carrier R&D system of intelligent sorting laboratories and material recycling innovation centers , building a solid technical barrier for the company's long-term and stable development. The independently developed low-value recyclable intelligent sorting process technology has been awarded a national patent and has been selected as an advanced and applicable technology for the construction of a national "zero-waste city".

2. Collaborate with the industry chain to enhance the overall strength of enterprises

Luhai Environmental Protection has established a vertically integrated operation model and closed-loop industrial chain of "recycling and sorting → recycling → platform services", forming an operation system that can simultaneously meet the needs of two-way customers. In the field of urban domestic waste services, it cooperates with the government to help improve the reduction rate and resource utilization rate of urban domestic waste; in terms of the synergy of the renewable resources industry, it innovates the production and marketing integration model, establishes strategic cooperation with leading companies in the downstream chemical industry and Fortune 500 companies, and builds the resilience of the renewable resources supply chain. This industrial chain synergy model effectively reduces operating costs, expands profit margins, and enhances the company's comprehensive risk resistance.

3. Policy support and seizing market opportunities. National industrial policies have provided strong support for the renewable resources industry. At present, the country has great potential for recycling and utilization of low-value recyclables. Luhai Environmental Protection 's low-value recyclables sorting center project in Xiamen has entered the second phase of large-scale expansion planning and construction. The Suzhou project (the first low-value recyclables industrialization project in the Yangtze River Delta) marks an important breakthrough in cross-regional expansion. Faced with a market scale of hundreds of billions, Luhai Environmental Protection has reached an agreement with many cities across the country. In the next 3-5 years, it is expected to take advantage of the policy to achieve rapid growth in performance.