GTHT has released a research report stating that EB ENVIRONMENT's (00257) subsidiary, China Everbright Greentech, has received a total of RMB 2.064 billion in national subsidies, with subsidy recovery progress exceeding expectations. The firm maintains a "buy" rating on the company, keeping unchanged its projected net profit forecasts of HK$4.048 billion, HK$4.182 billion, and HK$4.288 billion for 2025-2027 respectively, corresponding to EPS of HK$0.66, HK$0.68, and HK$0.70. The target price remains at HK$5.64. The company's accelerated national subsidy collections and expected continuous release of future dividend potential are driving a value revaluation.

**Subsidiary's National Subsidy Recovery Accelerates**

According to the report: 1) Based on the announcement, between July and August 2025, 33 project companies under Everbright Greentech, involving biomass comprehensive utilization, solar and wind power projects, received settlement notifications for additional subsidy funds from the State Grid totaling RMB 2.064 billion. 2) This round of national subsidy recovery by Everbright Greentech exceeded the RMB 1.534 billion received in Q1-Q3 2024, with subsidy recovery progress surpassing expectations and improving the company's cash flow.

**Stable H1 2025 Operations with Declining Construction Revenue but Growing Operating Revenue**

The firm noted that the company maintained steady operations in H1 2025, with construction revenue declining while operating revenue grew, and heating supply volume rising rapidly. 1) EB ENVIRONMENT achieved revenue of HK$14.304 billion in H1 2025, down 8% year-on-year, with attributable net profit of HK$2.207 billion, down 10% year-on-year. The performance decline was driven by a significant drop in construction revenue and foreign exchange losses. 2) The increased proportion of operating services drove comprehensive gross margin up 5.53 percentage points year-on-year to 44.26%, while net profit margin improved 0.84 percentage points year-on-year to 19.44%. The asset-liability ratio decreased 0.97 percentage points year-on-year to 63.30%. 3) Regarding operational metrics: H1 2025 household waste disposal volume increased 2% year-on-year to 28.57 million tons, incineration power generation per ton improved 3% year-on-year to 460 kWh, auxiliary power consumption rate decreased 0.3 percentage points year-on-year to 14.7%, showing improved operational efficiency. External steam supply volume increased 39% year-on-year, with rapid growth in heating supply.

**Steady Dividend Growth and Improved Free Cash Flow**

Additionally, the company's dividends have steadily increased while free cash flow has improved. 1) H1 2025 DPS was HK$0.15, up 7% year-on-year, with a dividend payout ratio of 41.76% compared to 35% in H1 2024 and 41.84% for full year 2024. Overall, despite declining performance, the company's total dividend payments remained stable with slight increases. 2) With reduced capital expenditure, free cash flow continues to improve. As capital expenditure remains contracted and national subsidy recovery improves, the company's positive free cash flow trend remains unchanged.