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]