Tianjin Capital Environmental Protection Group Company Limited (TCEPC) released its 2025 annual results: revenue was RMB4,760mn (-1.40% YoY) and attributable net profit (NP) was RMB862mn (+6.83% YoY), broadly in line with our estimate (RMB905mn). 4Q25 revenue/attributable NP were RMB1,313/160mn (-8.70/+23.78% YoY, +3.45/-29.90% QoQ). Affected by lower settled sewage volumes, the company's sewage treatment revenue declined (-3% YoY), but gross margin improved (+0.4pp YoY). As projects come on stream, we remain optimistic about the potential for both volume and tariff increases in sewage treatment. In 2025, the company received a one-off payment of RMB1,989mn from the Tianjin Municipal Water Authority to settle historical receivables, significantly boosting operating cash flow and supporting higher dividends. The dividend yield of H-shares is increasingly attractive; we estimate the 2026 H-share dividend yield could reach 6.4%. Maintain BUY for both A-/H-shares.
2025 sewage revenue -3% YoY; new business dragged GPM
Based in Tianjin and expanding nationwide, TCEPC's sewage treatment business generated RMB3.59bn in revenue in 2025 (-3.0% YoY), mainly due to lower settled volumes at some concession projects, in our view. However, benefiting from continued cost optimization, sewage treatment gross profit margin (GPM) rose 0.4pp YoY to 44.4%. Strategic new businesses showed mixed revenue trends in 2025, while GPMs fell across the board, dragging group GPM down by 1.5pp YoY to 38.3%. Specifically, the commissioning of the Junliangcheng entrusted project drove heating & cooling revenue up by 19.9% YoY to RMB190mn, but GPM declined by 3.0pp YoY to 14.0%. The hazardous waste business remained under pressure, with revenue -26.0% YoY to RMB110mn and GPM -4.9pp YoY to -18.0%.
2025 net operating cash flow up 139% YoY
In 2025, net operating cash flow rose 139% YoY to RMB3.30bn, mainly due to the RMB1,989mn one-off payment from the Tianjin Municipal Water Authority to settle historical receivables. Net cash outflow from investing activities increased 22% YoY to RMB910mn, mainly reflecting higher payments for project asset transfers and construction investments. TCEPC's dividend payout ratio (DPR) has risen annually since 2021, reaching 38.06% in 2025 (+5pp YoY), with A-/H-share dividend yields of 3.5/5.5% (based on DPS/year-end price). On our estimate, distributable cash flow in 2025 (net operating cash flow – capex – finance costs) could theoretically support a DPR of 242%. If the DPR reaches 40% in 2026 (+2pp YoY), the H-share dividend yield would correspond to 6.4% (based on the closing price as of 27 March 2026), suggesting attractive dividend yield.
Earnings forecasts and valuation
We lower our 2026/2027 attributable NP forecasts by 6.2/7.2% to RMB0.95/1.00bn and introduce our 2028 forecast of RMB1.04bn, implying 2026E EPS/BVPS of RMB0.60/6.93. The adjustment mainly reflects lower-than-expected sewage treatment revenue and GPM in 2025, leading us to reduce revenue and GPM assumptions. Considering: 1) the company's 2025-2027 attributable NP CAGR of 9% (our forecast) vs peer average of 2% (on Wind consensus, 8% excluding Capital Eco-Pro), and 2) industry-leading sewage treatment capacity utilization (90% in 2024, ranking first among peers), with further volume and price upside, we maintain our valuation premium and assign a 12.4x 2026E PE for its A-shares (previous: 12.2x), above its peers' average of 10.5x on Wind consensus (previous: 10.3x), for our target price of RMB7.46 (previous: RMB7.78). For H-shares, given fewer comparables, we refer to the company's average A/H premium of 61% over the past three months, arriving at a target price of HKD5.24 (previous: HKD5.00, based on a 70% A/H premium). Maintain BUY on both.
Risks: tariff adjustment in sewage treatment; intensified competition in hazardous waste; slower cash collection than we expect.

　　创业环保发布三季报：Q3实现营收12.69亿元（yoy+8.36%，qoq+18.01%），归母净利2.29亿元（yoy-10.44%，qoq+4.95%），符合我们此前预期（2.18-2.66亿）。2025年前三季度实现营收34.47亿元（yoy+1.70%），归母净利7.02亿元（yoy+3.59%），扣非净利5.98亿元（yoy-3.84%）。未来随在手项目陆续投产，我们看好污水处理量&价的提升潜力；H股股息率价值凸显，我们测算2025年H股股息率有望达5.2%，具备吸引力；A/H股均维持“买入”评级。
　　污水处理主业立足天津服务全国，未来量&价仍有提升潜力
　　公司核心业务为水处理和水资源利用，2024年污水处理业务营收/净利贡献占比均超76%，市占率位列行业第5。立足天津服务全国，2024年末公司权益类污水处理业务规模达527.01万吨/日（天津占比37%），产能利用率达90%（可比公司排名#1）。随产能扩张与提标改造，2018-24年公司污水处理量/价复合增速6.3/6.1%。2025年10月，公司公告拟投资咸阳路污水处理厂迁建二期工程项目，项目污水处理设计规模15万吨/日，预计于2026年6月底开工，建设期24个月。未来随在手项目陆续投产，我们认为公司污水处理量与污水处理单价仍有提升潜力。
　　费用管控能力强，2025年H股股息率或达5.2%
　　9M25公司期间费用率同比-1.68pct至11.36%，销售/管理/研发/财务费用率分别为0.17/4.09/0.82/6.28%，同比-0.06/-0.19/-0.09/-1.34pct，费用管控较优；其中财务费用同比-16%至2.16亿元，助力公司盈利提升。公司分红比例自2021年起逐年提升，2024年达33.07%，A/H股股息率2.85/5.58%（每股股利/年末收盘价）。据我们测算，2024年公司可供分派现金流（经营性净现金流-资本开支-财务费用）可支撑分红比例达43%，若2025-27年分红比例达36%（同比+3pct），将对应H股股息率5.2/5.9/6.2%（以2025/10/24收盘价测算），具备较强吸引力。
　　盈利预测与估值
　　维持盈利预测，我们预计公司2025-27年归母净利润为9.0/10.1/10.7亿元，对应2026年EPS/BPS0.64/7.00元。可比公司2026年Wind一致预期PE均值为10.3x，考虑到1）公司2025-27年归母净利CAGR（10%）高于可比均值（2%，剔除首创环保后为9%）；2）公司污水处理业务产能利用率领先同行（2024年90%，可比公司排名第一），且未来量价仍有提升潜力，我们给予公司A股2026年12.2倍目标PE，对应目标价7.78元（前值2025E12.2xPE，对应目标价7.09元）。由于港股可比公司较少，我们参考近3个月公司A/H平均溢价率（70%）进行估值，给予公司H股目标价5.00港元（前值4.70港元，对应A/H平均溢价率69%）。A/H股均维持“买入”。
　　风险提示：污水处理单价调整风险、危废市场竞争加剧、回款低于预期。