SINGAPORE (Aug 10): The research houses of DBS and Phillip Capital are positive on China Everbright Water after the environmental protection company on Monday reported a strong set of 1H17 results, with earnings for the half year up 41% at $44.4 million on higher revenue.
See: China Everbright Water 1H earnings rise 41% to $44.4 mil
While DBS is maintaining its “buy” call with a slightly higher target price of 65 cents from 64 cents previously, Phillip Capital has upgraded its rating on the stock to “buy” from “accumulate” and raised its price target to 61 cents from 57 cents.
In a Thursday report, Phillip Capital investment analyst Chen Guangzhi notes how there were seven of the group’s projects which commenced operation over 1H, with increased daily designed waste water treatment (WWT) capacity in conjunction with China’s water tariff hike.
He expects China Everbright Water to commence more projects going forward, and hence has revised his FY17 earnings per share (EPS) forecast to 3.6 cents to 3.4 cents previously to factor this in.
Although the analyst acknowledges the group’s management appears to be receiving abundant funding support from various sources based on recent activities and announcements, Chen believes the situation in Liaoning Province, China, where China Everbright Water has 14 projects, could remain challenging as the province’s economy remains weak.
“Thus, China Everbright Water could continue to face deferred payback of receivables in the near-term due to the local weak macro environment,” he cautions.
DBS analyst Patricia Yeung, on the other hand, projects the group’s growth in construction revenue to be at least 26% in FY18/19, with its Zhangqui water supply system project and Suizhou Water environment restoration project yet to commence construction.
“We are pleased that China Everbright Water is continuously making breakthroughs in business development. After securing the first sponge city project last year, it has subsequently extended into water environment restoration market and won the first urban-rural integration water supply project this year,” says Yeung.
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Looking ahead, the analyst believes China Everbright Water will continue to advance collaborations with both domestic and international institutions, as well as research institutions, to drive more breakthroughs in core technologies – which would in turn allow the company to win more projects in new areas.
“The recent win of its first underground WWT project with the adoption of anaerobic-anoxic-oxic membrane bio reactor is also the result of continuous advancement in technology research and development (R&D),” she adds.
As at 1.54pm, shares in China Everbright Water are trading 1 cent lower at 48 cents.
