EPS of $0.00 increased by 111.5% from previous year
Gross margin of 31.7%
Net income of 2.16M
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China Conch Environment Protection Holdings Limited (0587.HK) QQ2 2025 Financial Analysis – Industrial Waste Treatment and Cement Kiln Waste Solutions in China
Executive Summary
China Conch Environment Protection Holdings Limited reported a solid top-line performance for QQ2 2025 (quarter ended 30 June 2025), with revenue of 388.6 million CNY and an EBITDA of 119.1 million CNY, translating to an EBITDA margin of 30.6% and an operating margin of 8.3%. Gross profit stood at 123.1 million CNY on gross margin of approximately 31.7%. Operating income reached 32.38 million CNY, while net income was 2.16 million CNY, yielding a net margin of roughly 0.56%. Year-over-year metrics show strong growth momentum: revenue up about 76% YoY, gross profit up about 83% YoY, and operating income up over 200% YoY, with EPS of 0.0012 CNY. The QoQ comparison indicates stable sequential execution, though the company remains in a transitional phase where EBITDA and gross profitability are stronger than bottom-line profitability, underscoring a high operating leverage tied to scale,project execution, and non-operating items.
From a balance sheet and cash-flow perspective, liquidity remains tight with a current ratio of 0.82 and a quick ratio of 0.80, reflecting near-term working-capital pressures. Debt remains a meaningful component of the capital structure (debt ratio ~0.50; debt-to-capitalization ~0.62; long-term debt to capitalization ~0.58), signaling leverage risk even as cash-flow metrics show positive signals: operating cash flow per share is 0.147 CNY and free cash flow per share is 0.0504 CNY, suggesting cash generation is underway but not yet ample enough to de-risk balance-sheet leverage. Inventory turns are strong (approx. 15x), receivables turnover is ~1.0x, and the cash conversion cycle sits around 34 days, indicating moderate working-capital efficiency amidst sector cyclicality.
Market valuation remains elevated relative to some peers, with a price-earnings ratio around 60.7x and P/B around 0.356x, implying high expectations for continued growth from management and markets. The company’s strategic positioning in cement-kiln waste treatment, recycling services, and technical consulting could unlock medium-term upside as regulatory pressure and environmental mandates in China support waste-management investments. However, the bottom-line trajectory will hinge on cost discipline, capital allocation, and the ability to convert top-line growth into sustainable earnings and free cash flow.
Net Income: 2,162,500 CNY; Net Margin: 0.56%; EPS: 0.0012 CNY (diluted 0.0012 CNY).
YoY changes (where data is available): Revenue +76.0%; Gross Profit +82.7%; Operating Income +206.1%; Net Income +111.4%; EPS +111.5%.
Cost of revenue: 265,465,500 CNY; Gross profit 123,126,500 CNY.
Financial Highlights
Revenue and margin drivers:
- QQ2 2025 Revenue: 388,592,000 CNY; Gross Profit: 123,126,500 CNY; Gross Margin: 31.69%.
- EBITDA: 119,068,000 CNY; EBITDA Margin: 30.64%; Operating Income: 32,380,000 CNY; Operating Margin: 8.33%.
- Net Income: 2,162,500 CNY; Net Margin: 0.56%; EPS: 0.0012 CNY (diluted 0.0012 CNY).
- YoY changes (where data is available): Revenue +76.0%; Gross Profit +82.7%; Operating Income +206.1%; Net Income +111.4%; EPS +111.5%.
Profitability and cost structure:
- Cost of revenue: 265,465,500 CNY; Gross profit 123,126,500 CNY.
- Operating expenses (inclusive of SG&A): 109,624,500 CNY (selling/general/admin) and 75,490,500 CNY (G&A); Depreciation & amortization: 88,169,500 CNY.
- Total cost and expenses: 356,212,000 CNY; The company shows a robust EBITDA profile but faces a non-operating expense headwind (totalOtherIncome/expenses net: -31,048,500 CNY).
- Net income vs cash flow: Positive net income but low relative to revenue and a net income margin of 0.56%, highlighting that non-operating charges and tax influence the bottom line.
Liquidity, leverage, and capital structure:
- Current ratio: 0.819; Quick ratio: 0.801; Cash ratio: 0.310 – indicative of near-term liquidity constraints but not an outright liquidity crisis.
- Debt ratio: 0.498; Debt-to-equity: 1.655; Long-term debt to capitalization: 0.583; Total debt to capitalization: 0.623 – elevated leverage for an industrial services business.
- Cash flow indicators: Operating cash flow per share 0.147 CNY; Free cash flow per share 0.0504 CNY; Cash per share 0.351 CNY.
- Efficiency metrics: Inventory turnover 14.96x; Receivables turnover 1.008x; Payables turnover 1.459x; Cash conversion cycle 33.64 days; Asset turnover 0.0793; Fixed asset turnover 0.101.
Valuation and growth signals:
- Price-to-earnings: 60.72x; Price-to-book: 0.356x; Price-to-sales: 1.352x; EV/EBITDA: 22.34x; Price-to-free-cash-flow: 11.41x.
- The valuation implies market expectations of strong earnings growth ahead, supported by QoQ and YoY revenue expansion, but demands evidence of sustained profitability and cash-flow strength to justify the premium.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
388.59M
76.04%
100.00%
Gross Profit
123.13M
82.67%
100.00%
Operating Income
32.38M
206.12%
100.00%
Net Income
2.16M
111.40%
100.00%
EPS
0.00
111.54%
100.00%
Key Financial Ratios
currentRatio
0.82
grossProfitMargin
31.7%
operatingProfitMargin
8.33%
netProfitMargin
0.56%
returnOnAssets
0.04%
returnOnEquity
0.15%
debtEquityRatio
1.66
operatingCashFlowPerShare
$0.15
freeCashFlowPerShare
$0.05
priceToBookRatio
0.36
priceEarningsRatio
60.72
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data was provided for QQ2 2025. As a result, no management quotes or thematic highlights from management remarks could be extracted for this quarter.
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Forward Guidance
There is no explicit management guidance provided in the data for QQ2 2025. Consequently, an evidence-based forward guidance assessment relies on reported metrics and industry dynamics:
- Industry and policy backdrop suggest continued demand for industrial waste treatment and cement-kiln waste management in China, potentially supporting volume growth and recurring revenue.
- Key uncertainties include regulatory shifts, cement demand cycles, and the ability to convert revenue growth into sustained profitability amid elevated depreciation, amortization, and other operating expenses.
- A plausible path to improved visibility would be indications of contract wins, expansion into resource recycling, and tighter cost control enabling a higher operating leverage ratio. Investors should monitor quarterly progress on working capital, capex discipline, and whether the company can translate EBITDA strength into steady free cash flow generation.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0587.HK Focus
31.69%
8.33%
0.15%
60.72%
0895.HK
5.31%
-19.40%
-3.97%
-9.49%
1330.HK
49.80%
30.00%
2.36%
15.17%
1065.HK
35.10%
24.60%
2.21%
10.76%
0257.HK
44.30%
34.70%
3.77%
2.66%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Neutral to cautiously positive. QQ2 2025 demonstrates meaningful top-line growth and a strong EBITDA buffer, but the bottom line and cash-flow profile require further improvement to justify a higher-risk, high-multiple valuation. The stock trades at a premium on earnings (P/E ≈ 60.7x) despite a modest net income contribution and leverage concerns. Investors should monitor: (1) sustained revenue growth translated into meaningful free cash flow; (2) leverage normalization and working-capital optimization; (3) progress in capex alignment with revenue scale; and (4) any management guidance or contract wins that could validate continued margin expansion. If cash flow conversion improves and debt is progressively delevered, the investment case strengthens toward a more constructive stance.
Key Investment Factors
Growth Potential
Growth driver centers on increasing volumes from cement-kiln waste treatment, expansion of resource recycling services, and potential scale benefits as China accelerates industrial waste management compliance. YoY revenue growth of 76% in QQ2 2025 signals strong demand recovery or expansion in project pipeline.
Profitability Risk
Key risks include:(1) near-term liquidity pressures given a current ratio below 1.0 and relatively high leverage (debt capitalization ~0.62); (2) reliance on cement industry volumes and regulatory environment; (3) potential volatility from non-operating items and tax exposures affecting net income; (4) competitive risks in environmental services and waste management in PRC; (5) execution risk around capex and working-capital optimization.
Financial Position
Financial health shows robust gross and EBITDA margins but modest net profitability and constrained liquidity. Positive operating cash flow per share and a positive free cash flow per share support liquidity growth, yet balance-sheet leverage and relatively low ROE (~0.15%) indicate room for capital-structure optimization and efficiency improvements.
SWOT Analysis
Strengths
Niche environmental solutions focused on cement kiln waste treatment, recycling, and technical consulting in China.
Strong gross margin (~31.7%) and EBITDA margin (~30.6%), reflecting high value-added service models.
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