| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 23.57 | 1401 |
| Intrinsic value (DCF) | 1.35 | -14 |
| Graham-Dodd Method | 3.94 | 151 |
| Graham Formula | 3.65 | 132 |
China Everbright Water Limited is a leading water environmental management service provider operating primarily in Mainland China, with a strategic presence in Germany. As a subsidiary of China Everbright Water Holdings Limited, the company specializes in comprehensive water solutions including wastewater treatment, reusable water production, river restoration, leachate treatment, and the construction and maintenance of pipeline networks. The company has expanded its expertise into emerging areas such as solar energy integration, sponge city construction, and wastewater source heat pumps, positioning itself at the intersection of traditional utilities and environmental technology. With a designed daily wastewater treatment capacity of approximately 7 million m³ across its portfolio, China Everbright Water plays a critical role in China's environmental infrastructure, addressing the nation's pressing water scarcity and pollution challenges while contributing to sustainable urban development through its innovative ecological engineering projects.
China Everbright Water presents a mixed investment profile with several notable strengths and concerns. The company demonstrates solid profitability with HKD 1.02 billion in net income on HKD 6.85 billion revenue, translating to a healthy net margin of approximately 15%. The dividend yield appears reasonable with a payout of HKD 0.06 per share. However, significant red flags emerge from the negative operating cash flow of HKD -57.9 million despite positive earnings, suggesting potential working capital challenges or aggressive accounting. The substantial debt burden of HKD 16.4 billion against cash reserves of HKD 1.83 billion raises leverage concerns, particularly in a rising interest rate environment. The company's beta of 0.477 indicates lower volatility than the market, which may appeal to defensive investors, but the cash flow and debt issues warrant careful monitoring.
China Everbright Water operates in China's regulated water utility sector, where its competitive positioning is shaped by several factors. The company benefits from its affiliation with the state-backed China Everbright Group, which provides advantages in securing government contracts and navigating regulatory complexities. Its scale is significant with 7 million m³/day treatment capacity, though not market-leading compared to some state-owned giants. The company's diversification into complementary services like river restoration, sponge city development, and solar energy integration creates cross-selling opportunities and differentiates it from pure-play water treatment operators. However, the competitive landscape is fragmented with numerous regional players and dominant state-owned enterprises enjoying preferential access to projects and financing. China Everbright Water's technological capabilities in areas like leachate treatment and water reuse provide some differentiation, but the sector remains largely commoditized with price competition for contracts. The company's international presence in Germany, while small, provides operational expertise and technology transfer opportunities that could enhance its domestic competitiveness. The high debt load may constrain its ability to aggressively bid for new projects compared to better-capitalized competitors.