Core Viewpoint - The article discusses the historical struggle for control over China's water resources, highlighting the shift from foreign dominance to a more balanced domestic control, emphasizing the importance of water security as a national priority [1][2][25]. Group 1: Historical Context - The Chinese water industry was once on the brink of being dominated by foreign capital, with 60% of the water supply market controlled by foreign entities, affecting nearly 100 million people's access to water [2][10]. - In the 1990s and early 2000s, rapid urbanization led to significant infrastructure gaps, particularly in water services, prompting the government to open up to foreign investment to fill these gaps [4][6]. Group 2: Foreign Investment and Its Impact - Major foreign companies like Veolia and Suez entered the Chinese market, often outbidding local firms for contracts, which resulted in substantial financial gains for local governments but raised concerns about long-term implications for water quality and pricing [8][10]. - Water prices surged significantly after foreign companies took over operations, with examples like Tianjin experiencing price increases from 0.68 yuan to 3.4 yuan per ton, a nearly fivefold rise [13]. Group 3: Water Quality Concerns - Numerous incidents of water quality issues arose under foreign management, including severe contamination cases in Lanzhou and other cities, leading to public health scares and loss of trust [15][18]. - The article cites global examples of foreign water management failures, indicating a pattern of profit-driven practices that compromise local water quality and accessibility [20][25]. Group 4: Policy Response and Domestic Growth - In response to the challenges posed by foreign control, the Chinese government initiated a "de-foreignization" policy in 2015, which included the cancellation of special operating rights for foreign companies and the strengthening of local water management [27][29]. - Domestic companies like Beijing Enterprises Water Group and Beijing Capital Water have emerged as key players, leveraging government support and technological advancements to reclaim market share from foreign firms [31][33]. Group 5: Current Market Dynamics - The current landscape of the Chinese water market is characterized by a "state-owned enterprise-led, multi-party collaboration" model, ensuring better water quality and pricing stability for consumers [35][36]. - Partnerships between local firms and foreign companies, such as the collaboration between Suez and Chongqing Water Group, illustrate a new cooperative approach that maintains local control while benefiting from foreign expertise [40][42]. Group 6: Future Challenges and Strategies - Despite progress, challenges remain, particularly in rural areas where water infrastructure is still lacking, and urbanization continues to strain water resources [49][50]. - Ongoing efforts are needed to enhance domestic technological capabilities, improve regulatory frameworks, and ensure sustainable water management practices to safeguard water resources for future generations [52].

香 港 交 易 及 結 算 所 有 限 公 司 及 香 港 聯 合 交 易 所 有 限 公 司 對 本 公 告 的 內 容 概 不 負 責，對其準確性或完整性亦不發表任何聲明，並明確表示，概不對因本公告全部 或任何部分內容而產生或因倚賴該等內容而引致的任何損失承擔任何責任。 （於開曼群島註冊成立並遷冊往百慕達之有限公司） （股份代號：855） KANGDA INTERNATIONAL ENVIRONMENTAL COMPANY LIMITED （於開曼群島註冊成立的有限公司） （股份代號：6136） 康 達 國 際 環 保 有 限 公 司 聯合公告 重續有關工程服務的 持續關連交易 工程服務協議 茲提述(i)康達日期為二零二二年十一月八日的公告；及(ii)中國水務日期為二零 二五 年 十 月六 日 的公 告 ，該 兩 份 公告 內 容均 涉 及（ 其中 包 括 ）康 達香 港（ 康 達的 間接 全 資 附屬 公 司 ）與江 西 銀龍（ 中 國 水 務的 附 屬公 司 ）根 據現 有 工程 服 務 協議 進行的持續關連交易。 由於現有工程服務協議將於二零二五年十二月三十一日屆滿，於二零二五年十 二月二十二日，康 ...

Core Viewpoint - The performance of Hong Kong public utility companies has shown a mixed trend, with some companies experiencing significant profit growth while overall growth has decreased. China Water (00855.HK) reported a revenue decline of 12.9% to HKD 5.183 billion and a net profit of HKD 571 million, reflecting strategic adjustments rather than a fundamental decline in value [1][2]. Financial Performance - China Water's total revenue for the first half of FY26 was HKD 5.183 billion, down 12.9% year-on-year, while net profit was HKD 571 million, indicating a strategic focus on core business despite apparent pressures [1]. - The company's capital expenditure decreased by 31.8% to HKD 1.24 billion, with a full-year target below HKD 2 billion, improving cash flow and balance sheet structure [4][5]. Business Segments - The urban water supply business remains a key revenue driver, with a 13.1% decline in revenue due to construction and maintenance impacts, but core water supply operations saw a 5.6% increase in water fee income and a 5% rise in water sales volume [1][2]. - The environmental business has emerged as a new growth engine, with revenue from wastewater treatment services increasing by 8.7% to HKD 832 million, and segment profit rising by 29.7% to HKD 367 million [2]. Strategic Initiatives - China Water is pursuing a light-asset development strategy, optimizing its capital structure and reducing capital expenditures to enhance financial stability and support core business growth [4][5]. - The company has signed a long-term loan agreement with the Asian Development Bank for USD 100 million, providing stable funding for future development [6]. Market Outlook - The water utility sector is expected to benefit from macroeconomic policies and increased local government payment capabilities, with a focus on improving infrastructure and reducing water loss rates [6]. - The company is well-positioned to capitalize on upcoming policy support and funding influx, with a strategic focus on both light and heavy asset operations to ensure long-term stability [11]. Shareholder Returns - China Water has maintained a mid-term dividend distribution plan of HKD 0.13 per share, reflecting its commitment to shareholder interests amidst market volatility [9]. Investment Sentiment - The public utility sector is gaining renewed interest from investors seeking stable assets, with China Water identified as a key player benefiting from favorable market conditions and long-term growth potential [10][11].

Core Insights - The company reported a 12.9% year-on-year decline in total revenue and a 24.4% drop in net profit attributable to shareholders for FY26H1, amounting to HKD 5.18 billion and HKD 570 million respectively, primarily due to fluctuations in the mainland real estate market and a decrease in water connection income [1] - Despite the overall decline, the core water supply business showed growth, with related revenue and water sales increasing by 4.5% and 5.0% to HKD 1.80 billion and 7.6 million tons respectively [1] - The company has accelerated water price increases, with 8 water supply projects approved for price hikes, achieving the annual target of 8 to 10 projects, which is expected to exceed expectations for FY26 [1] Financial Performance - The company's capital expenditure decreased by 31.8% year-on-year to HKD 1.24 billion for FY26H1, with a full-year target of less than HKD 2 billion, representing a decline of at least 40.4% [2] - The reduction in capital expenditure is anticipated to support the company's high dividend policy [2] Ratings and Forecasts - The company has revised down its net profit forecasts for FY26-28 by 10.8%, 14.8%, and 14.8% respectively, and adjusted the target price from HKD 6.90 to HKD 6.52, reflecting a potential upside of 10.1% and a price-to-earnings ratio of 9.5 times for FY27 [2] - The company maintains a "Buy" rating based on the FY26H1 performance and anticipated water price increases [2]

Core Viewpoint - The company reported a decline in total revenue and net profit for the first half of FY2026, with total revenue at HKD 5.183 billion, down 12.9% year-on-year, and net profit at HKD 571 million, down 24.4% year-on-year [1] Revenue Breakdown - The company's revenue decreased by HKD 769 million year-on-year, with the largest declines in the following segments: water supply construction (down HKD 456 million), property sales (down HKD 241 million), water supply connections (down HKD 223 million), and direct drinking water construction (down HKD 80 million) [2] - The net profit of HKD 571 million reflects a 24.4% year-on-year decline, but adjusted for a non-cash loss of HKD 64 million due to a share dilution from a takeover offer, the adjusted net profit would be approximately HKD 635 million, down 15.9% year-on-year [2] Cost Management - The company has successfully reduced costs, with selling and administrative expenses down 9.0% to HKD 437 million and financial expenses down 17.6% to HKD 352 million [2] - The debt-to-asset ratio showed a downward trend, decreasing by 2.5 percentage points to 64.3% at the end of FY26H1 compared to the beginning of the period [2] Segment Performance - In the urban water supply segment, revenue was HKD 3.271 billion, down 13.1%, with segment profit at HKD 941 million, down 17.4%, primarily due to a reduction in installation, maintenance, and construction projects [2] - The pipeline direct drinking water segment saw revenue of HKD 263 million, down 28.3%, with segment profit at HKD 75 million, down 55.2%, also affected by reduced installation and maintenance projects [2] - The environmental segment reported revenue of HKD 832 million, up 8.7%, with segment profit at HKD 367 million, up 29.7%, driven by increased revenue from the Huizhou Daya Bay Mobil project [2] - The total contracting construction segment had revenue of HKD 398 million, down 6.1%, with segment profit at HKD 158 million, down 60.2%, mainly due to a decrease in water supply project construction [2] - The property segment generated revenue of HKD 170 million, with segment profit of HKD 500,000, down 96.4% year-on-year due to a decline in property project sales [2] Water Supply Operations - The company reported a 5% year-on-year increase in water supply volume, with revenue from water supply operations at HKD 1.801 billion, up 4.5% [3] - The average water price was HKD 2.37 per ton, with 8 projects completing price adjustments and over 20 projects initiating price adjustment procedures, which is expected to enhance profit margins [3] Capital Expenditure and Dividends - Capital expenditure decreased by 31.8% to HKD 1.243 billion, while the total dividend remained stable at HKD 0.13 per share, maintaining a dividend yield of 4.8% [4] - The company anticipates steady growth in core water supply operations, with no accounts receivable risk and increasing free cash flow, enhancing dividend capacity [4] Profit Forecast - Due to the ongoing decline in connection and construction revenue, the company has revised its net profit forecasts for FY2026-2028 from HKD 1.372 billion, 1.387 billion, and 1.415 billion to HKD 1.136 billion, 1.206 billion, and 1.232 billion, respectively, corresponding to PE ratios of 8.4, 7.9, and 7.8 times [4]

Investment Rating - The report maintains a "Buy" rating for China Water Affairs (855 HK) with a target price adjusted to HKD 6.52, reflecting a potential upside of 10.1% from the current price of HKD 5.92 [5][8]. Core Insights - Despite a decline in overall revenue and net profit for FY26H1, the core water supply business showed resilience with a revenue increase of 4.5% and a sales volume increase of 5.0% [2][5]. - The company has accelerated its water price adjustments, with 8 projects approved for price increases, surpassing the annual target of 8 to 10 projects [3][5]. - A significant reduction in capital expenditure by 31.8% to HKD 12.4 billion in FY26H1 is expected to support the company's high dividend policy [4][5]. Financial Performance Summary - For FY26H1, total revenue and net profit decreased by 12.9% and 24.4% year-on-year, amounting to HKD 5.18 billion and HKD 570 million respectively [1][5]. - The water supply connection revenue fell by 28.6% to HKD 560 million, primarily due to fluctuations in the mainland real estate market [1][5]. - The wastewater treatment service revenue increased by 14.5% to HKD 360 million, driven by the Huizhou Mobil project contributing revenue since FY25 [2][5]. Revenue and Profit Forecast Adjustments - The forecast for shareholder net profit has been reduced by 10.8%, 14.8%, and 14.8% for FY26, FY27, and FY28 respectively [5][17]. - The target price adjustment reflects these changes, with the new estimates indicating a decrease in revenue projections for FY26 to HKD 9.899 billion, down from previous forecasts [5][17].

Industry Overview - The carbon quota allocation mechanism is linked to production output without a total carbon emission cap, focusing on intensity-based dynamic adjustments [1][2] - The allocation mechanism is based on the experience of the power generation industry, implementing free quota distribution based on carbon emission intensity control, with total quotas dynamically associated with industry production levels [2] - New key emission units in the steel, cement, and aluminum smelting industries must complete the first quota clearance for 2024 by 2025 [1][2] Company Tracking - Longking Environmental has seen significant shareholding increases from Zijin Mining, with stable leadership transitions expected to enhance Longking's business [3] - China Water Affairs reported a revenue of HKD 5.183 billion for FY26H1, a decrease of 12.9% year-on-year, with a net profit of HKD 571 million, down 24.4% year-on-year, primarily due to a decline in connection and construction activities [3] - The company has reduced capital expenditures by 31.8% to HKD 1.243 billion in FY26H1, while maintaining a dividend of HKD 0.13 per share, resulting in a dividend yield of 4.8% [3] Solid Waste Sector Insights - The solid waste sector has shown strong fundamentals in Q3 2025, with a 12% increase in net profit and a 2.7 percentage point increase in gross margin [3] - Free cash flow in the solid waste sector reached RMB 13.3 billion in Q1-Q3 2025, a year-on-year increase of 28%, with capital expenditures down 12% [3] - The average waste incineration companies' output per ton increased by 1.8% year-on-year in H1 2025, indicating operational efficiency improvements [3] Water Sector Insights - The water sector is expected to experience a cash flow turnaround, with significant increases in free cash flow anticipated starting in 2026 [4] - Recent water price reforms in major cities like Guangzhou and Shenzhen are expected to enhance revenue and profitability for water companies [5] - Recommended companies in the water sector include Yuehai Investment and Xingrong Environment, with a focus on improving cash flow and dividend payouts [5] Industry Tracking - The sales of new energy sanitation vehicles increased by 61.32% year-on-year in the first ten months of 2025, with a penetration rate of 18.02% [6] - The average price of biodiesel remained stable, while net profits per ton have declined [6] - Lithium carbonate prices have risen, improving profitability in lithium battery recycling [6]

Core Viewpoint - Dongwu Securities maintains a "Buy" rating for China Water Affairs (00855), highlighting stable growth in core water supply operations, absence of receivable risks, decreasing capital expenditures, and increasing free cash flow, which enhances cash flow value and dividend capacity [1] Financial Performance - For the first half of FY26, the company reported total revenue of HKD 5.183 billion and a net profit attributable to shareholders of HKD 571 million, with a reduction in sales and administrative expenses by 9.0% to HKD 437 million and financial expenses down by 17.6% to HKD 352 million [2] - The debt-to-asset ratio showed a downward trend, decreasing by 2.5 percentage points to 64.3% at the end of FY26H1 compared to the beginning of the period [2] Segment Performance - In FY26H1, revenue from urban water supply reached HKD 3.271 billion with segment profit of HKD 941 million, influenced by a reduction in installation, maintenance, and construction projects [2] - The pipeline drinking water segment generated revenue of HKD 263 million with a segment profit of HKD 75 million [2] - Environmental segment revenue was HKD 832 million, up 8.7% year-on-year, with segment profit increasing by 29.7% to HKD 367 million, primarily due to revenue growth from the Huizhou Daya Bay Mobil project [2] - Total construction contracting revenue was HKD 398 million with a segment profit of HKD 158 million, while property revenue was HKD 170 million with a segment profit of HKD 500,000 [2] Water Supply Operations - Water supply revenue for FY26H1 was HKD 1.801 billion, a year-on-year increase of 4.5% (5.6% in RMB terms), with water sales volume reaching 76 million tons, up 5.0% [3] - The average water price was HKD 2.37 per ton, with 8 projects completing price adjustments and over 20 projects initiating adjustment procedures, indicating a normalization of the pricing mechanism that is expected to boost profit margins [3] Direct Drinking Water Strategy - The direct drinking water segment's revenue included HKD 185 million from operations, HKD 7 million from installation and maintenance, and HKD 53 million from construction, with equipment sales revenue increasing by 34.1% to HKD 19 million and bottled water sales up 145.4% to HKD 4 million [4] - Capital expenditures continued to decline, totaling HKD 1.243 billion, down 31.8% year-on-year, while the total dividend remained stable at HKD 0.13 per share, maintaining a dividend yield of 4.8% [4]

Core Viewpoint - Dongwu Securities maintains a "buy" rating for China Water Affairs (00855), highlighting the robust growth of its core water supply operations, absence of receivable risks, decreasing capital expenditures, and increasing free cash flow, which enhances its dividend capacity [1] Financial Performance - For the first half of FY26, the company reported total revenue of HKD 5.183 billion and a net profit attributable to shareholders of HKD 571 million, with a reduction in sales and administrative expenses by 9.0% to HKD 437 million and financial expenses down by 17.6% to HKD 352 million [2] - The debt-to-asset ratio showed a downward trend, decreasing by 2.5 percentage points to 64.3% at the end of FY26H1 compared to the beginning of the period [2] Segment Performance - In FY26H1, revenue from urban water supply reached HKD 3.271 billion with a segment profit of HKD 941 million, influenced by a reduction in installation, maintenance, and construction projects [2] - The pipeline drinking water segment generated revenue of HKD 263 million with a segment profit of HKD 75 million [2] - The environmental segment saw revenue of HKD 832 million, up 8.7% year-on-year, with a segment profit of HKD 367 million, a 29.7% increase, primarily due to revenue growth from the Huizhou Daya Bay Mobil project [2] - Total construction contracting revenue was HKD 398 million with a segment profit of HKD 158 million, while the property segment generated revenue of HKD 170 million with a segment profit of HKD 500,000 [2] Water Supply Operations - The company achieved a 5% year-on-year increase in water supply volume, with revenue from water supply operations at HKD 1.801 billion, a 4.5% increase year-on-year [3] - The total water sales volume was 76 million tons, with an average water price of HKD 2.37 per ton; 8 projects completed price adjustments, and over 20 projects have initiated adjustment procedures [3] Direct Drinking Water Strategy - The direct drinking water segment reported revenue of HKD 185 million, with equipment sales increasing by 34.1% to HKD 19 million and bottled water sales soaring by 145.4% to HKD 4 million [4] - Capital expenditures decreased by 31.8% to HKD 1.243 billion, while the total dividend remained stable at HKD 0.13 per share, resulting in a dividend yield of 4.8% [4]

Group 1: China Gas Performance - China Gas reported a revenue of HKD 34.481 billion for the six months ending September 30, 2025, a year-on-year decrease of 1.8% [3] - The gross profit was HKD 5.506 billion, down 6.0% year-on-year, while the net profit attributable to shareholders fell by 24.2% to HKD 1.334 billion [3] - The company experienced a decline in new residential connections, with 676,300 new users added, a decrease of approximately 25.2% compared to the previous year [4] Group 2: Industry Challenges - The domestic natural gas consumption in China saw a slight decline of 0.2% year-on-year, totaling 317.75 billion cubic meters from January to September [3] - The ongoing challenges in the real estate market have led to a decrease in new user development for the gas industry [4] - China Gas is actively participating in the national initiative for urban gas pipeline upgrades and is pushing for reforms in natural gas pricing mechanisms [3] Group 3: China Water Performance - China Water reported a revenue of HKD 5.183 billion for the six months ending September 30, 2025, down 12.9% from HKD 5.953 billion in the same period last year [6] - The profit attributable to shareholders decreased to HKD 571 million, down from HKD 756 million year-on-year [6] - The company is focusing on optimizing its development strategy, prioritizing projects with the best returns, which has led to a slowdown in construction activities and related revenues [9] Group 4: Water Industry Insights - China Water's revenue from urban water supply and pipeline drinking water supply segments decreased significantly, with urban water supply revenue falling by 13.1% to HKD 3.271 billion [9] - The environmental business saw an increase in revenue by 8.7%, primarily due to growth in wastewater treatment services [9] - Long-term operational models like TOO (Transfer-Own-Operate) are expected to provide higher intrinsic value compared to other models, benefiting the company's water supply business [10]