China Conch Environment (0587.HK) Q2 2025 Earnings Report

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.