China Everbright Water (U9E) H1 2023 earnings summary

Executive summary

• H1 2023 revenue fell 11% YoY to HK$3.082bn, while EBITDA rose 21% to HK$1.288bn and profit attributable to equity holders increased 22% to HK$632.19m.

• Gross margin expanded 11 percentage points to 46%, supported by higher operation income, lower direct costs and a larger contribution from higher-margin operations.

• Operations covered 166 environmental projects with ~RMB30.8bn invested; the portfolio comprised 173 projects across listed categories and had 7.43m m³/day of treatment or supply capacity.

Financial highlights

• Gross profit rose 16% to HK$1.410bn; profit before tax increased 27% to HK$879.93m and profit for the period rose 23% to HK$674.85m.

• Direct costs and operating expenses fell 26% to HK$1.672bn; the comparison benefited from a one-off transfer of previously deducted input VAT to costs in H1 2022.

• Finance costs rose 17% to HK$299.72m, reflecting higher average borrowings and rates; income tax expense increased 45% to HK$205.08m.

• Operating cash flow was an outflow of HK$534.83m; cash and cash equivalents closed at HK$2.264bn, down from HK$2.845bn at FY2022-end.

• FX translation loss in OCI was HK$277.59m; total comprehensive income was HK$397.3m, compared with a HK$206.7m loss in H1 2022.

Outlook and guidance

• Strategy focuses on water-related businesses, sustainable and high-quality development, technology, operational management and business-model innovation.

• Priorities include upgrading existing projects, expanding asset-light EPCO and O&M work, integrated water-plant and pipeline projects, and exploring ecological agriculture.

• Revenue from operations is expected to increase as projects under preparation or construction are completed and commence operations; no quantified financial guidance was stated.