Capital Eco-Pro has reported 2025 revenue of RMB18.9bn(-5.81%YoY),an attributable NP of RMB1.8bn(-49.78%YoY),and arecurring NP of RMB1.6bn(+2.68%YoY).For 4Q25,revenue was RMB5.4bn(-12.02%YoY,+15.05%QoQ),while the attributable NP arrived at RMB338mn(+24.24%YoY,-33.09%QoQ).The company’s 2025 attributable NP was broadly in line with our previous estimate of RMB1.8bn.The YoY decline mainly reflected investment income booked in 2024 from the disposal of ECO Singapore.Maintain BUY,given that new projects coming on stream,tariff hikes at project companies,and efficiency gains from existing assets should support earnings growth.
Water tariff hikes to lift profitability;GPM+1.9pp YoY in 2025
We see the company still has potential to grow operating water capacity.As of the end of 2025,total capacity in the water supply and wastewater treatment businesses stood at 12.61mn tpd and 14.67mn tpd,respectively,with the operating capacity at 8.10mn tpd and 10.40mn tpd.Water supply and wastewater tariffs are set under an“allowed cost+allowed return”framework.This gives the water business relatively stable returns,enabling water tariffs to offer some inflation resistance.Given rising fixed and operating costs,and with the repricing cycle approaching,we expect the company’s water projects to see tariff hikes gradually.In 2025,three water supply projects raised tariffs,covering 760ktpd of water supply capacity.Fifteen wastewater projects raised tariffs,covering 900ktpd of treatment capacity.The company’s blended gross profit margin(GPM)rose by 1.9pp YoY to 36.7%in 2025.As 1)new projects are about to come on stream and 2)blended water tariffs may gradually increase,we expect the company’s profitability to improve steadily going forward.
Earnings forecast and valuation
We estimate attributable NP at RMB1,891/1,959/2,044mn in 2026/2027/2028,-1/-1%versus our previous 2026/2027 estimates,implying athree-year CAGR of 4.87%.Our corresponding EPS forecasts are RMB0.26,RMB0.27,and RMB0.28.Comparable companies trade at an average of 13.0x 2026E PE,versus 13.5x previously.Given the company’s high-quality assets,free cash flow turning positive in 2025,and likely continued water tariff increases in 2026-2028E,we apply amultiple of 13.6x 2026E PE to the company.Our target price arrives at RMB3.63(previously RMB3.85,on 14.8x 2026E PE).Maintain BUY.
Risks:tariff hikes progress more slowly than we expect;accounts receivable collection comes in below our expectations;capacity expansion falls short of our expectations;market competition intensifies.