China Everbright Water (CEWL) is an environmental protection group focusing on water environment management. Listed on the Mainboards of both Singapore and Hong Kong, its controlling shareholder is China Everbright Environment Group.
1. What is CEWL’s business about and what are the key segments?
CEWL’s main business is water environment management. CEWL is focused on water-related areas, including raw water protection, water supply, municipal wastewater treatment, industrial wastewater treatment, reusable water, river-basin ecological restoration and sludge treatment and disposal. Meanwhile, the company engages in other areas such as new rural construction, ecological agriculture, agricultural non-point source pollution control and the resource utilisation of livestock and poultry manure.
As of now, CEWL has a business presence in 13 provinces, municipalities, and autonomous regions in China, as well as in countries overseas, such as Mauritius. The projects invested in, constructed and managed by the company have a designed daily water treatment capacity exceeding 7.6 million cubic metres.
2. Ebitda fell by 11% to HK$2.20 billion ($359 million) in FY2024. How does CEWL plan to improve operational leverage?
In 2024, CEWL’s business remained stable, with a y-o-y decrease in ebitda primarily due to certain one-time events and exchange rate fluctuations. Excluding these factors, ebitda was roughly flat compared to the previous year.
To better manage operational costs and enhance its competitive advantage, CEWL has implemented measures such as centralised procurement, the “solar power + wastewater treatment plant” model and the “Intelligent Water” management system.
This year, the company is systematically undertaking measures to improve quality and efficiency, including:
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Several projects underwent upgrading works due to tariff hikes. Existing projects expanded incremental businesses, such as solar power and reusable water. Refined operations management measures further reduced operational costs. Upgrade of relevant management systems reduced supply chain costs for existing projects.
3. CEWL maintained strong cash and liquidity levels, with cash and cash equivalents of HK$1.85 billion as of Dec 31, 2024. How does the group plan to deploy its capital this year?
In 2025, CEWL plans to balance business growth, debt control and shareholder returns through diverse capital deployment, specifically:
To allocate a capex of HK$1.7 billion to HK$2.0 billion for project construction and other purposes to drive business growth.
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To maintain a stable dividend policy and reward shareholders.
To keep its gearing ratio within 65% for 2025 (61% in 2024, which is below the average of major peers in China) and the debt-to-equity ratio below 180%.
To continue expanding financing channels both within and outside mainland China.
4. CEWL secured asset-light projects in Indonesia and Egypt in FY2024. What is the rationale behind the focus on asset-light expansion outside Mainland China? What markets will be next?
According to the 2023 Statistical Yearbook of Urban and Rural Construction in China, water supply coverage rates in urban areas reached 99.43%, while county areas recorded 98.27%; wastewater treatment rates were 98.69% and 97.66%, respectively. This suggests that China’s traditional water industry market is nearing saturation, with fixed asset investment growth gradually slowing. In contrast, many Southeast Asian countries offer significant opportunities for infrastructure development in municipal water supply and drainage.
Adopting a prudent approach, CEWL is entering the Southeast Asian markets through asset-light business models, gradually promoting its water treatment expertise. Leveraging on the advantages of China’s “Belt and Road” initiative, the company is prioritising investment in stable markets along the initiative, such as Singapore, Indonesia and Vietnam.
5. With close to 100% of revenue from Mainland China, are there plans to diversify geographically to mitigate market concentration risks?
Over the past 20 years, the Chinese economy and environmental protection industry have experienced rapid development and reform. In the current complex international environment, the stability and sustainable development advantages of the Chinese market are increasingly prominent. CEWL sees the Chinese market as the foundation of its strategic development, focusing on China’s major strategies, such as protection of the Yangtze River and initiatives relating to carbon and pollution reduction. The company has strengthened its presence in key regions, such as Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Guangdong-Hong Kong-Macau Greater Bay Area, achieving positive results.
To maintain steady growth, CEWL is actively seizing opportunities from the Belt and Road Initiative, entering international markets through asset-light projects.
Looking ahead, CEWL will adhere to its development strategy of “Rooted in China and Aiming Global”, leveraging the strengths of the Chinese market while prudently entering stable international markets along the “Belt and Road” initiative to diversify business development.
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6. In light of China’s “Dual Carbon” goals and push for an ecological civilisation, how is CEWL aligning its long-term strategy with national policy trends, including resource recycling and low-carbon water treatment?
CEWL aligns with China’s strategic goals of “Peaking Carbon Emission and Achieving Carbon Neutrality” (Dual Carbon), integrating green development concept and ecological civilisation spirit into its corporate strategies to tackle water pollution issues.
Strategic positioning: Offering systematic solutions for carbon reduction, pollution control and circular economy.
Business development: Building on traditional foundations to explore the resource and energy value of wastewater to achieve industry chain extension and balanced development.
Technological innovation: Actively developing energy-saving technologies and exploring diversified resource utilisation, focusing on areas such as solar power, reusable water and wastewater source heat pumps.
7. Sustainability and ESG have increasingly been a key focus. How is your company committed towards sustainability?
As a leading water environment management service provider, CEWL integrates sustainability and ESG principles and focuses on three key areas:
Environmental management: The company enhances the application of pollution and carbon reduction technologies aligned with China’s “Dual Carbon” strategy; promotes business sustainability through digital technology; and optimises energy structures to reduce costs and improve efficiency, ultimately enhancing carbon reduction value.
Social responsibility: The company prioritises occupational health management and career development for employees to improve their well-being; enhances supply chain and client management and conducts community activities to foster public engagement and environmental education, enhancing social value across local communities.
Corporate governance: The company further strengthens the oversight and decision-making processes of the board and board committees to address associated risks and opportunities, guiding its strategy and risk management through standardised processes.
8. In 2024, CEWL explored a “dark factory” technical framework to enhance intelligent water plant operations. Can you share more about these smart initiatives?
CEWL has launched a “dark factory” pilot programme at its wastewater treatment projects located in multiple cities of China to enhance project intelligence level. Key activities include:
Deploying technologies such as intelligent sensing, wireless transmission, and image recognition.
Establishing a methodology for abnormal observation in wastewater treatment plants to promote graded risk management.
Monitoring and analysing abnormal events through information systems and optimising key equipment with high failure rates.
The main outcomes achieved are a significant reduction in manual inspection time, decreased safety risks for personnel, a shift of focus from inspections to preventive maintenance tasks, enhanced professional competency among project staff, and improved operational quality and efficiency by reducing unexpected equipment failures.
9. Energy management, contracting and recycling of residual oxygen were implemented in some projects. Are there plans to expand these technologies across the full operational portfolio?
CEWL will actively promote the cost-saving technologies mentioned above this year. Three EMC projects have been implemented, effectively reducing operating costs, with seven more in preparation. The future plans focus on promoting technologies in projects with longer operational timelines and significant energy efficiency potential.
Residual oxygen recovery technology has been applied in three projects, further reducing operating costs, with plans for future expansion.
The company also holds reserves in self-developed technologies, including the EBOAC ozone catalytic oxidation process, precise aeration, and chemical dosing.
Over the next three to five years, the company will continue to innovate and implement these technologies to enhance project operational efficiency and strengthen its competitive position.
10. What is CEWL’s value proposition to its shareholders and potential investors?
CEWL’s core value proposition includes:
Stable returns: The company has maintained a payout ratio exceeding 30% and a dividend yield of over 7%, reflecting its commitment to sharing the benefits of corporate growth with shareholders.
Industry advantages: The company benefits from China’s environmental protection policies and the growing demand for water treatment and environmental management, driven by rapid urbanisation and industrial development in Southeast and Central Asia.
Shareholder background: As the sole water operation platform under China Everbright Group, a leading financial holding group, the company leverages the strengths of a state-owned enterprise while maintaining market-oriented operational efficiency.
Business strength: It is among the few water environment management companies in China with full business coverage and a complete industrial chain.
Operational philosophy: The company’s existing projects generate relatively stable cash flows, primarily from local government clients.
Financial advantages: The company has diversified and flexible financing channels which it can strategically utilise based on market conditions and funding needs.
The company has achieved a return on equity exceeding 8% over the past three years. However, CEWL’s current P/E is only half the average of its key industry peers, while its P/B stands at approximately 70% of the average, and there is potential for valuations to improve.
Raphael Lim is the associate director of research and FinLit at the Singapore Exchange
