Core Viewpoint - North Control Water Group reported a decline in revenue and net profit for the first half of 2025, while maintaining a slight increase in dividend per share compared to the previous year [1][2]. Revenue Breakdown - Total revenue for H1 2025 was 10.46 billion, a decrease of 7.5% year-on-year, with net profit attributable to shareholders at 0.897 billion, down 20.0% [1]. - Revenue from operational services, including water treatment and urban resource services, accounted for 86.1% of total revenue, reflecting a 10.8 percentage point increase year-on-year [1]. Water Treatment Services - Revenue from wastewater and reclaimed water business reached 4.52 billion, up 3.0% year-on-year, with a domestic gross margin of 60%, an increase of 1 percentage point [2]. - Water supply services generated revenue of 1.45 billion, a slight increase of 0.4% year-on-year, but the domestic gross margin decreased to 41%, down 2 percentage points due to changes in customer structure [2]. Construction Services - Revenue from construction services fell to 0.712 billion, a significant decline of 56.6% year-on-year, attributed to the company's shift to a light asset strategy and completion of existing projects [2]. Technical Services and Equipment Sales - Revenue from technical services and equipment sales was 0.742 billion, down 35.5% year-on-year, but gross margin improved to 34%, an increase of 4 percentage points [2]. Urban Resource Services - Urban resource services generated 3.04 billion in revenue, a year-on-year increase of 13.1%, although gross margin decreased to 20%, down 1 percentage point due to intensified competition in hazardous waste markets [2]. Financial Performance - The company recognized an asset impairment loss of 0.259 billion in H1 2025, impacting overall performance but not cash flow [2]. - Financial expenses decreased by 0.37 billion due to debt structure optimization [2]. Capital Expenditure and Cash Flow - Capital expenditure for H1 2025 was 0.943 billion, a significant decrease of 40.0% from 1.57 billion in the same period last year [3]. - Free cash flow has turned positive since 2022, with expectations for continued improvement as capital expenditures decline [3]. Profit Forecast and Valuation - Projected net profit attributable to shareholders for 2025-2027 is 1.66 billion, 1.70 billion, and 1.71 billion respectively, with expected dividends showing a growth of 3%-5% [3]. - The estimated dividend yield for the stock price as of August 28, 2025, is between 6.4%-6.6%, leading to a "buy" rating [3].

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - The company reported a revenue of 10.46 billion HKD for H1 2025, a decrease of 7.5% year-on-year, and a net profit attributable to shareholders of 0.897 billion HKD, down 20.0% year-on-year. The interim dividend per share is 0.0735 HKD, reflecting a 5.0% increase from 0.0700 HKD in the same period last year [2][4]. Summary by Sections Revenue Breakdown - The total revenue of 10.46 billion HKD consists of 86.1% from operational services, 6.8% from construction services, and 7.1% from technical consulting and equipment sales. The operational business's proportion increased by 10.8 percentage points year-on-year [7]. - Water treatment services generated 4.52 billion HKD in revenue, up 3.0% year-on-year, with a domestic gross margin of 60%, an increase of 1 percentage point. Water supply services achieved 1.45 billion HKD, a slight increase of 0.4% year-on-year, with a domestic gross margin of 41%, down 2 percentage points due to changes in customer structure [7]. - Construction services revenue fell to 0.712 billion HKD, a decline of 56.6% year-on-year, attributed to the company's light asset strategy and the completion of existing projects [7]. - Technical services and equipment sales generated 0.742 billion HKD, down 35.5% year-on-year, with a gross margin of 34%, up 4 percentage points [7]. - Urban resource services reported 3.04 billion HKD in revenue, a 13.1% increase year-on-year, with a gross margin of 20%, down 1 percentage point due to intensified competition and reduced demand from upstream industrial enterprises [7]. Financial Performance - The company recognized an asset impairment loss of 0.259 billion HKD in H1 2025, which negatively impacted performance but did not affect cash flow. Financial expenses were optimized, resulting in a reduction of 0.37 billion HKD [7]. - Capital expenditure significantly decreased to 0.943 billion HKD, down 40.0% from 1.57 billion HKD in the same period last year. Free cash flow has turned positive since 2022, with a favorable trend expected to continue as capital expenditures decline [7]. Profit Forecast and Valuation - The company is projected to achieve net profits attributable to shareholders of 1.66 billion HKD, 1.70 billion HKD, and 1.71 billion HKD for 2025, 2026, and 2027, respectively. Assuming a 3%-5% increase in dividends for 2025, the corresponding dividend yield for the stock price as of August 28, 2025, is estimated to be between 6.4%-6.6% [7].