Sealand: EB ENVIRONMENT (00257) revenue structure transformation results consolidated, maintain "Accumulate" rating.

Sealand released a research report maintaining the "Accumulate" rating on EB ENVIRONMENT (00257), and expects the company's operating revenue for 2026-2028 to be HK$26.620 billion/HK$26.091 billion/HK$25.912 billion, respectively, with net profit attributable to shareholders of HK$3.909 billion/HK$4.016 billion/HK$4.379 billion, respectively, corresponding to PE ratios of 7.09x/6.90x/6.33x. The company's operating revenue proportion continues to rise, and as project operations improve quality and efficiency, cash flow is expected to continue improving. Sealand's main views are as follows: In 2026H1, the company's operating service revenue proportion rose to 76%, consolidating the results of revenue structure transformation In 2026H1, the company achieved operating revenue of HK$14.181 billion, a year-on-year decrease of 1%; and achieved net profit attributable to shareholders of HK$2.431 billion, a year-on-year increase of 10%. In 2026H1, the company's operating service revenue reached HK$10.755 billion, a year-on-year increase of 8%, accounting for 76% of total revenue; construction service revenue reached HK$853 million, a year-on-year decrease of 54%, with its proportion falling to 6%; financial income accounted for 18%. Domestic waste treatment scale reached 163,100 tons/day, with operating efficiency continuing to improve As of June 30, 2026, the company's environmental energy and green environmental protection segments had implemented a total of 196 waste-to-energy projects, with a designed domestic waste treatment capacity of 163,100 tons/day (including entrusted operation scale); the designed treatment scale for kitchen waste and food waste was approximately 8,693 tons/day; and the designed treatment/supply scale for water treatment and supply was approximately 7.6397 million cubic meters/day. In 2026H1, in the environmental energy segment, waste intake/on-grid electricity/heat and steam supply increased by approximately 2%/2%/11% year on year, respectively; in the environmental water segment, sewage treatment/reclaimed water treatment increased by 6%/3% year on year, respectively; in the green environmental protection segment, waste intake/biomass raw material processing/heat and steam supply increased by 2%/4%/19% year on year, respectively. Dividend per share increased year on year The company distributed an interim dividend of 16.0 HK cents/share for 2026, an increase from 15.0 HK cents/share in the same period of 2025. The dividend payout ratio for the first half of 2026 (i.e., dividends as a proportion of profit attributable to shareholders) reached 40%, down 2 pct from 42% in the same period of 2025. Gross profit margin slightly decreased year on year, while net profit margin slightly increased year on year In 2026H1, the company's gross profit margin was 43.06%, down 1.2 pct year on year, mainly affected by the sharp decline in construction service revenue; the company's net profit margin was 21.52%, up 2.08 pct year on year. Risk warnings The progress of operating revenue improvement may fall short of expectations; risk of gross profit margin decline; progress of accounts receivable collection may fall short of expectations; risk of dividend payout ratio decline; risk that the decline in construction revenue exceeds expectations; impairment risk.