德银-中国-公用事业行业-中国环境：危险废物处理市场更新-20171208-16页_1mb

China Environmental Market Summary

Core Content

The document provides an update on the hazardous waste treatment (HWT) market in China, based on insights from Sunny Friend, a leading HWT company in Taiwan, and analysis of several Chinese HWT-related companies including Dongjiang Environmental, China Everbright Greentech, China Everbright Intl, and Beijing Enterprises Water. It includes valuation metrics, financial performance, and investment recommendations.

Key Market Insights

• Market Balance: In certain cities, the HWT market is already balanced, with local governments reducing approved capacities due to perceived sufficiency. However, the national market still faces under-capacity.
• M&A Challenges: M&A is not recommended for expansion in HWT due to poor asset quality and the complexity of the industry, which increases the risk of errors in acquisitions.
• Cement Kilns: Cement kilns are unlikely to be a major competitor to traditional HWT incineration due to location restrictions and the inability to treat most types of hazardous waste.

Investment Recommendations

• China Everbright Intl (0257.HK): Recommended as a "Buy" with a target price of HKD10.50. The company is noted for potential earnings beats, re-rating due to operational earnings, and improved free cash flow from its WTE business.
• Dongjiang Environmental (0895.HK): Recommended as a "Buy" with a target price of HKD10.88.
• Beijing Enterprises Water (0371.HK): Recommended as a "Buy" with a target price of HKD6.02.
• China Everbright Greentech (1257.HK): Recommended as a "Buy" with a target price of HKD6.71.

Financial Overview

Beijing Enterprises Water (0371.HK)

• Price (6 Dec 17): HKD 6.02
• Target Price: HKD 7.40
• 52 Week Range: HKD 4.91 - 6.70
• Market Cap: HKDm 51,737 / USDm 6,621.7
• Financial Summary:
  • DB EPS (HKD): 0.18, 0.27, 0.33, 0.48, 0.58, 0.67
  • Reported EPS (HKD): 0.20, 0.28, 0.36, 0.49, 0.58, 0.67
  • DPS (HKD): 0.08, 0.10, 0.12, 0.16, 0.19, 0.22
  • BVPS (HKD): 1.8, 1.9, 1.9, 2.2, 2.6, 3.1
  • Weighted Average Shares (m): 8,643, 8,715, 8,712, 8,725, 8,775, 8,826
  • Average Market Cap (HKDm): 44,268, 50,048, 42,809, 51,737, 51,737, 51,737
  • Enterprise Value (HKDm): 61,863, 74,247, 72,547, 88,838, 98,111, 100,748
• Valuation Metrics:
  • P/E (DB): 28.1, 21.4, 14.8, 12.3, 10.2, 8.8
  • P/E (Reported): 25.2, 20.9, 13.5, 12.1, 10.2, 8.8
  • P/BV: 2.92, 2.93, 2.72, 2.68, 2.27, 1.94
  • Dividend Yield (%): 1.5, 1.7, 2.4, 2.7, 3.2, 3.6
  • EV/Sales: 6.9, 5.5, 4.2, 4.1, 6.8, 6.3
  • EV/EBITDA: 18.9, 17.9, 12.7, 13.6, 18.5, 16.2
  • EV/EBIT: 19.3, 18.3, 13.0, 14.5, 20.0, 17.5
• Income Statement (HKDm):
  • Sales Revenue: 8,926, 13,503, 17,355, 21,430, 14,392, 16,013
  • Gross Profit: 3,564, 5,044, 5,932, 7,343, 6,732, 7,773
  • EBITDA: 3,270, 4,143, 5,722, 6,509, 5,307, 6,216
  • Depreciation: 68, 77, 147, 366, 401, 444
  • Amortisation: 0, 0, 0, 0, 0, 0
  • EBIT: 3,201, 4,066, 5,575, 6,142, 4,906, 5,773
  • Net Interest Income/(Expense): -812, -950, -1,306, -1,519, -1,954, -2,340
  • Associates/Affiliates: 278, 429, 375, 1,269, 3,248, 3,725
  • Profit Before Tax: 2,667, 3,546, 4,644, 5,893, 6,200, 7,157
  • Income Tax Expense: 594, 778, 971, 1,063, 679, 789
  • Minorities: 279, 312, 389, 300, 163, 193
  • Net Profit: 1,794, 2,455, 3,227, 4,298, 5,126, 5,943
• Cash Flow (HKDm):
  • Cash Flow from Operations: 0, 0, 0, 0, 0, 0
  • Net Capex: -634, -2,094, -378, -127, -160, -160
  • Free Cash Flow: -634, -2,094, -378, -127, -160, -160
  • Equity Raised/(Bought Back): 333, 640, 6,999, 114, 114, 114
  • Dividends Paid: -495, -802, -1,060, -1,085, -1,428, -1,428
  • Net Inc/(Dec) in Borrowings: 3,343, 8,291, 5,141, 6,244, 13,886, 13,886
  • Other Investing/Financing Cash Flows: -922, -2,052, -1,809, -3,074, -1,237, -1,237
  • Net Cash Flow: 0, 0, 0, 0, 0, 0
  • Change in Working Capital: -6,856, -6,913, -3,687, -11,709, -12,138, -12,138
• Balance Sheet (HKDm):
  • Cash and Other Liquid Assets: 6,091, 6,374, 10,921, 6,765, 7,288, 4,104
  • Tangible Fixed Assets: 1,299, 1,380, 2,831, 2,809, 2,776, 2,764
  • Goodwill/Intangible Assets: 0, 0, 0, 0, 0, 0
  • Associates/Investments: 3,109, 4,466, 5,685, 9,333, 13,819, 18,966
  • Other Assets: 41,142, 52,272, 61,610, 75,280, 83,266, 90,783
  • Total Assets: 51,641, 64,492, 81,047, 94,187, 107,149, 116,617
  • Interest Bearing Debt: 23,490, 30,933, 36,078, 42,402, 56,288, 60,464
  • Other Liabilities: 9,062, 13,269, 18,202, 21,618, 16,705, 17,425
  • Total Liabilities: 32,552, 44,201, 54,280, 64,020, 72,993, 77,888
  • Shareholders’ Equity: 15,784, 16,184, 16,501, 19,370, 22,963, 27,111
  • Minorities: 3,304, 4,107, 10,266, 10,798, 11,193, 11,618
  • Total Shareholders’ Equity: 19,089, 20,290, 26,767, 30,168, 34,156, 38,729
  • Net Debt: 17,400, 24,559, 25,157, 35,637, 49,000, 56,360
• Key Company Metrics:
  • Sales Growth (%): 39.3, 51.3, 28.5, 23.5, -32.8, 11.3
  • DB EPS Growth (%): 35.4, 47.0, 23.8, 45.7, 20.5, 15.3
  • EBITDA Margin (%): 36.6, 30.7, 33.0, 30.4, 36.9, 38.8
  • EBIT Margin (%): 35.9, 30.1, 32.1, 28.7, 34.1, 36.0
  • Payout Ratio (%): 37.6, 33.7, 32.1, 32.0, 32.0, 32.0
  • ROE (%): 12.3, 15.4, 19.7, 24.0, 24.2, 23.7
  • Capex/Sales (%): 7.1, 15.5, 2.2, 0.6, 1.1, 1.2
  • Capex/Depreciation (x): 9.3, 27.2, 2.6, 0.3, 0.4, 0.4
  • Net Debt/Equity (%): 91.2, 121.0, 94.0, 118.1, 143.5, 145.5
  • Net Interest Cover (x): 3.9, 4.3, 4.3, 4.0, 2.5, 2.5

China Everbright Greentech (1257.HK)

• Price (6 Dec 17): HKD 6.71
• Target Price: HKD 7.90
• 52 Week Range: HKD 5.29 - 7.02
• Market Cap: HKDm 13,677 / USDm 1,750.5
• Financial Summary:
  • DB EPS (HKD): 0.10, 0.14, 0.31, 0.47, 0.64, 0.71
  • Reported EPS (HKD): 0.10, 0.13, 0.30, 0.47, 0.64, 0.71
  • DPS (HKD): 0.00, 0.00, 0.00, 0.09, 0.13, 0.14
  • BVPS (HKD): 0.3, 1.4, 2.0, 4.0, 4.5, 5.1
  • Weighted Average Shares (m): 2,066, 2,066, 2,066, 2,066, 2,066, 2,066
  • Average Market Cap (HKDm): na, na, na, 13,677, 13,677, 13,677
  • Enterprise Value (HKDm): na, na, na, 13,193, 15,488, 19,822
• Valuation Metrics:
  • P/E (DB): na, na, na, 14.1, 10.4, 9.3
  • P/E (Reported): na, na, na, 14.1, 10.4, 9.3
  • P/BV: 0.00, 0.00, 0.00, 1.66, 1.47, 1.31
  • Dividend Yield (%): 1.4, 1.9, 2.1, 2.8, 3.4, 3.8
  • EV/Sales: 2.8, 2.1, 2.2, 2.8, 2.1, 2.2
  • EV/EBITDA: 8.6, 7.1, 7.5, 8.6, 7.1, 7.5
  • EV/EBIT: 9.9, 8.2, 8.9, 9.9, 8.2, 8.9
• Income Statement (HKDm):
  • Sales Revenue: 1,058, 1,203, 3,000, 4,646, 7,290, 8,965
  • Gross Profit: 293, 435, 992, 1,481, 2,102, 2,571
  • EBITDA: 306, 442, 983, 1,543, 2,174, 2,660
  • Depreciation: 31, 40, 86, 99, 126, 186
  • Amortisation: 24, 33, 46, 109, 166, 240
  • EBIT: 251, 369, 852, 1,335, 1,882, 2,233
  • Net Interest Income/(Expense): -26, -41, -68, -121, -209, -366
  • Associates/Affiliates: 0, 0, -1, 0, 0, 0
  • Profit Before Tax: 225, 328, 783, 1,214, 1,673, 1,867
  • Income Tax Expense: 25, 56, 154, 238, 351, 392
  • Minorities: 3, -1, 0, 5, 7, 7
  • Net Profit: 196, 272, 629, 971, 1,315, 1,468
• Cash Flow (HKDm):
  • Cash Flow from Operations: 310, -37, 495, 740, 1,308, 1,073
  • Net Capex: -682, -1,090, -1,587, -2,124, -4,059, -4,796
  • Free Cash Flow: -372, -1,127, -1,092, -1,384, -1,888, -3,723
  • Equity Raised/(Bought Back): 0, 0, 0, 3,277, 0, 0
  • Dividends Paid: 0, -172, 0, -194, -263, -294
  • Net Inc/(Dec) in Borrowings: 138, 611, 622, 7,379, 6,054, 7,282
  • Other Investing/Financing Cash Flows: 493, -3,005, -1,780, 3,532, 6, 6
  • Net Cash Flow: 259, 1,859, 597, 4,275, -828, -964
  • Change in Working Capital: -9, -456, -440, -698, -728, -1,432
• Balance Sheet (HKDm):
  • Cash and Other Liquid Assets: 569, 1,044, 886, 3,804, 3,985, 4,094
  • Tangible Fixed Assets: 773, 1,600, 1,714, 2,183, 2,690, 4,567
  • Goodwill/Intangible Assets: 1,359, 1,662, 2,976, 4,424, 6,821, 9,313
  • Associates/Investments: 0, 14, 34, 55, 55, 55
  • Other Assets: 859, 1,247, 1,854, 3,210, 4,963, 7,007
  • Total Assets: 3,560, 5,567, 7,464, 13,676, 18,514, 25,036
  • Interest Bearing Debt: 572, 1,157, 1,968, 3,352, 5,815, 10,242
  • Other Liabilities: 2,361, 1,489, 1,295, 2,063, 3,374, 4,279
  • Total Liabilities: 2,932, 2,646, 3,263, 5,415, 9,188, 14,521
  • Shareholders’ Equity: 613, 2,907, 4,187, 8,238, 9,290, 10,464
  • Minorities: 15, 14, 13, 23, 36, 51
  • Total Shareholders’ Equity: 628, 2,921, 4,201, 8,261, 9,326, 10,515
  • Net Debt: 3, 112, 1,082, -453, 1,829, 6,148
• Key Company Metrics:
  • Sales Growth (%): nm, 13.7, 149.3, 54.9, 56.9, 23.0
  • DB EPS Growth (%): na, na, 39.0, 34.0, 22.0, 9.9
  • EBITDA Margin (%): 29.0, 36.8, 32.8, 33.2, 29.8, 29.7
  • EBIT Margin (%): 23.8, 30.7, 28.4, 28.7, 25.8, 24.9
  • Payout Ratio (%): 0.0, 0.0, 0.0, 20.0, 20.0, 20.0
  • ROE (%): 32.0, 15.5, 17.7, 15.6, 15.0, 14.9
  • Capex/Sales (%): 64.5, 90.8, 52.9, 45.7, 43.8, 53.5
  • Capex/Depreciation (x): 12.4, 15.0, 10.2, 6.4, 6.8, 7.4
  • Net Debt/Equity (%): 0.4, 3.8, 25.8, -5.5, 19.6, 58.5
  • Net Interest Cover (x): 9.6, 9.0, 12.6, 7.7, 7.7, 7.1

China Everbright Int'l (0257.HK)

• Price (6 Dec 17): HKD 10.50
• Target Price: HKD 13.50
• 52 Week Range: HKD 8.24 - 11.26
• Market Cap: HKDm 47,068 / USDm 6,024.2
• Financial Summary:
  • DB EPS (HKD): na, 0.45, 0.63, 0.84, 1.03, 1.13
  • Reported EPS (HKD): 0.38, 0.46, 0.62, 0.84, 1.03, 1.13
  • DPS (HKD): 0.11, 0.19, 0.21, 0.29, 0.36, 0.39
  • BVPS (HKD): 3.6, 3.8, 3.9, 5.2, 5.9, 6.6
  • Weighted Average Shares (m): 4,484, 4,484, 4,483, 4,483, 4,483, 4,483
  • Average Market Cap (HKDm): 48,038, 54,702, 39,630, 47,068, 47,068, 47,068
  • Enterprise Value (HKDm): 53,325, 66,156, 56,711, 67,877, 75,761, 85,024
• Valuation Metrics:
  • P/E (DB): 0.0, 27.0, 14.1, 12.5, 10.2, 9.3
  • P/E (Reported): 28.2, 26.2, 14.2, 12.5, 10.2, 9.3
  • P/BV: 3.18, 2.93, 2.72, 2.68, 2.27, 1.94
  • Dividend Yield (%): 1.0, 1.5, 2.3, 2.7, 3.2, 3.6
  • EV/Sales: 8.4, 7.8, 4.2, 4.1, 6.8, 6.3
  • EV/EBITDA: 18.9, 17.9, 12.7, 13.6, 18.5, 16.2
  • EV/EBIT: 19.3, 18.3, 13.0, 14.5, 20.0, 17.5
• Income Statement (HKDm):
  • Sales Revenue: 6,355, 8,535, 13,971, 19,275, 23,151, 27,284
  • Gross Profit: 3,084, 4,093, 5,623, 7,888, 10,045, 11,600
  • EBITDA: 2,796, 3,760, 4,988, 7,083, 8,989, 10,071
  • Depreciation: 79, 91, 163, 211, 240, 268
  • Amortisation: 36, 93, 150, 257, 358, 502
  • EBIT: 2,680, 3,576, 4,675, 6,614, 8,390, 9,300
  • Net Interest Income/(Expense): -381, -452, -640, -860, -1,089, -1,315
  • Associates/Affiliates: -1, -6, 63, 41, 20, 20
  • Profit Before Tax: 2,299, 3,119, 4,644, 5,893, 6,200, 7,157
  • Income Tax Expense: 534, 778, 971, 1,063, 679, 789
  • Minorities: 279, 312, 389, 300, 163, 193
  • Net Profit: 1,703, 2,085, 2,785, 4,298, 5,126, 5,943
• Cash Flow (HKDm):
  • Cash Flow from Operations: -1,187, -1,538, 221, -2,380, -1,365, -846
  • Net Capex: -216, -1,209, -3,189, -2,124, -3,196, -4,796
  • Free Cash Flow: -1,402, -2,747, -1,092, -1,384, -1,888, -3,723
  • Equity Raised/(Bought Back): 0, 660, 6,999, 114, 114, 114
  • Dividends Paid: -495, -802, -1,060, -1,085, -1,428, -1,428
  • Net Inc/(Dec) in Borrowings: 3,343, 8,291, 5,141, 6,244, 13,886, 13,886
  • Other Investing/Financing Cash Flows: -922, -2,052, -1,809, -3,074, -1,237, -1,237
  • Net Cash Flow: 0, 0, 0, 0, 0, 0
  • Change in Working Capital: -6,856, -6,913, -3,687, -11,709, -12,138, -12,138
• Balance Sheet (HKDm):
  • Cash and Other Liquid Assets: 4,094, 5,953, 6,341, 10,539, 9,566, 8,522
  • Tangible Fixed Assets: 1,684, 2,516, 3,187, 3,567, 3,961, 4,567
  • Goodwill/Intangible Assets: 3,406, 4,419, 7,250, 9,420, 12,494, 15,652
  • Associates/Investments: 1,335, 638, 651, 692, 712, 732
  • Other Assets: 20,681, 27,096, 32,104, 39,757, 48,767, 58,097
  • Total Assets: 31,200, 40,623, 49,532, 63,976, 75,500, 88,759
  • Interest Bearing Debt: 9,137, 15,821, 21,616, 28,995, 56,288, 60,464
  • Other Liabilities: 4,220, 5,382, 8,071, 2,063, 3,374, 4,279
  • Total Liabilities: 13,357, 21,203, 29,687, 5,415, 9,188, 14,521
  • Shareholders’ Equity: 16,263, 17,196, 17,389, 23,364, 26,963, 27,111
  • Minorities: 1,580, 2,224, 2,456, 3,045, 3,922, 4,879
  • Total Shareholders’ Equity: 17,843, 19,421, 19,845, 26,409, 30,274, 38,729
  • Net Debt: 5,042, 9,867, 15,275, 18,455, 25,483, 33,809
• Key Company Metrics:
  • Sales Growth (%): 19.5, 34.3, 63.7, 38.0, 20.1, 17.9
  • **DB EPS Growth