After our recent company visit, we are more optimistic about theoutlook for Dynagreen Environmental Protection （“Dynagreen”）due to the strong capacity expansion of its waste-to-energy（“WTE”） business. Also, the company’s A-share IPO may berealized earlier than our previous expectation. Reiterate Buy withTP raised by 39.0% to HK$8.20 amid its deeply discountedvaluation.
　　Strong capacity expansion. After our recent company visit, weare fascinated with the strong capacity expansion of Dynagreen.
　　We foresee daily processing capacity of waste incineration willgrow at CAGR of 34.6% for FY16-19E. Municipal solid waste（“MSW”） treatment volume is expected to grow at a CAGR of22.3% from 3.17 million tonnes for FY16 to 5.80 million tonnes forFY19 （see figure 1）。
　　Earlier A-share IPO possible. Dynagreen has planned to issue116 million A-shares to raise net proceeds of not over Rmb560m（see our company reports dated 7 December 2016 and 24 March2017 respectively）。 We think the related authorities will cut the redtape for A-share IPOs market, so we believe the A-share IPO ofDynagreen may be realized by the end of 2017 at the soonest,earlier than our previous expectation of 2H18, which will helpboost H-share prices technically.
　　FY17-18 earnings forecasts revised upward. Considering thestrong capacity expansion, we revise upward our FY17-18earnings forecasts by 13.4% and 5.7% respectively. Factoring inFY19 profit forecast, net profit is expected to grow at a CAGR of19.4% for FY16-19E.
　　Reiterate Buy with TP raised by 39.0% to HK$8.20. Dynagreennow trades at FY17E P/E of 8.0x, which is in unreasonably deepdiscount to its HK-listed peers average of 17.2x. We switch ourvaluation methodology for Dynagreen from forward P/E method toDCF method to reflect the company’s long-term growth. Wecorrespondingly raise our target price by 39.0% from HK$5.90 toHK$8.20, which represents undemanding FY17E P/E of 14.6x andoffers lucrative upside potential of 81.8%. Reiterate Buy.