27 Mar 2024

FY23 revenue decreased by 39.6% YoY to HK$4.98bn, mainly due to 1) a 76.7% decline in construction revenue on fewer new projects; and 2) a 1.6% decline in revenue from power sales and waste treatment fees to HK$3.43bn with i) power sold increased by 18% YoY to 5,349 GWh; and ii) MSW processing capacity up by 15% YoY to 15.3m tons with utilization rate down by 2.2ppt to 107.1%; offset by Rmb continual depreciation (FY23 revenue from power & waste up by 5.8% YoY in Rmb); and 3) revenues from environmental hygiene and other services income rose by 50.7% YoY to HK$0.34bn, while finance income was up by 10.5% YoY to HK$0.19bn. Overall GPM up by 11.1ppt YoY to 41.8% mainly due to 1) the higher margin operation segment, which accounted for 68.9% of total sales (FY22: 42.3%), outgrew the construction segment with YoY decline in shares of revenue by 32.5ppt to 20.4% in FY23; and 2) GPM of environmental hygiene segment was up by 5.3ppt YoY to 39.6%. G&A as a % of revenue increased sharply by 6.2ppt YoY to 13.2% as revenue fell while number of operating projects increased. As a result, FY23 NP was down 24.9% to HK$1,001m, which is 23% lower than our expectations as topline is lower than forecast. Payout ratio remained flat at around 20%.

CROSBY Research – Canvest Environmental (1381 HK/BUY): Topline down 40% on fewer construction projects