Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Views - The company reported a revenue of 6.7 billion yuan in the first half of 2025, a year-on-year decrease of 11.2%, while the net profit attributable to shareholders was 502 million yuan, an increase of 20.85% year-on-year [2][6] - The decline in revenue is primarily attributed to technical upgrades in hazardous waste resource utilization projects and challenges in the environmental engineering business [12] - The company expects to see improved profitability and cash flow in the second half of 2025, with potential resource utilization flexibility being released [6] Summary by Sections Financial Performance - In H1 2025, the company achieved a revenue of 6.7 billion yuan, down 11.2% year-on-year; net profit attributable to shareholders was 502 million yuan, up 20.85% year-on-year; and non-recurring net profit was 454 million yuan, up 10.24% year-on-year [2][6] - Q2 2025 saw revenue of 3.39 billion yuan, a decrease of 23.3% year-on-year, while net profit attributable to shareholders was 278 million yuan, an increase of 25.3% year-on-year [2][6] Business Segments - Revenue from hazardous waste resource utilization was 5.205 billion yuan, down 8.3% year-on-year, due to temporary production halts for technical upgrades [12] - Environmental operation revenue was 904 million yuan, up 2.3% year-on-year, while environmental engineering revenue was 592 million yuan, down 40.04% year-on-year due to selective order acceptance [12] Profitability and Cash Flow - The overall gross margin improved to 18.2%, up 3.93 percentage points year-on-year, with significant contributions from higher-margin projects [12] - Operating cash flow net amount improved significantly, reaching 347 million yuan in H1 2025, an increase of approximately 240 million yuan year-on-year [12] Future Outlook - The company anticipates that the profitability of resource utilization projects will improve, with a focus on the performance of metal prices such as bismuth, antimony, and tin [12] - Forecasted net profits for 2025-2027 are 791 million yuan, 911 million yuan, and 1.029 billion yuan, respectively, with corresponding PE ratios of 12.6x, 10.9x, and 9.7x [12]

Core Insights - China Water Affairs reported a revenue of approximately HKD 11.657 billion for the fiscal year ending March 31, 2025, representing a year-on-year decline of 9.4% [1] - Net profit was approximately HKD 1.075 billion, down 29.9% year-on-year [1] - Adjusted EBITDA increased by 1.8% year-on-year to HKD 5.26 billion [1] Financial Performance - The company proposed a final dividend of HKD 0.15 per share, maintaining an annual dividend of HKD 0.28 per share, with a payout ratio of 42.4% [1] - Total revenue decline was attributed to a decrease in construction-related capital expenditure, which fell by 36.9% from HKD 4.6 billion to HKD 2.9 billion [1] - Expected capital expenditure for the fiscal year 2025-2026 is projected to be no more than HKD 2 billion [1] Business Segments - Performance of water supply projects improved, with urban water supply operating revenue reaching HKD 3.53 billion, a year-on-year increase of 6.5%, and a profit margin of 32.6% [1] - Direct drinking water revenue was HKD 393 million, up 23.7% year-on-year, with a profit margin of 36.9% [1] - Environmental operations revenue surged by 69.9% year-on-year to HKD 640 million, with profits increasing by 56.9% to HKD 560 million and a profit margin of 35.3% [1] Strategic Developments - The company is actively optimizing its development strategy to address challenges, focusing on improving investment returns from core businesses, reducing capital expenditures, and enhancing the efficiency of existing projects [1] - Long-term investors, including Orix Group and Great Wall Life Insurance, increased their stakes by 7.62% and 5.04%, respectively [1] - Taikang Asset Management made a strategic investment of HKD 1.5 billion in subsidiary Beijing Yinlong, indicating confidence in the company's future prospects [1] Market Outlook - The government is expected to stabilize and expand domestic demand, with a positive national development trend [1] - Low inflation and market-driven water fee adjustments are anticipated, with water price increases becoming a consensus, as seen in Guangzhou's recent water fee hike, which is likely to benefit the profitability recovery of the water services industry [1]