Datang Environment (1272.HK) Q2 2024 Earnings Report

Datang Environment Industry Group reported QQ2 2024 revenue of 1,424,316,546 CNY, up 14.05% YoY and 20.83% QoQ, underpinned by continued activity in environmental protection projects tied to coal-fired power generation. Gross profit reached 371,697,402 CNY with a gross margin of 26.10%, while EBITDA stood at 434,520,095 CNY (EBITDAR 30.51% of revenue). Operating income remained negative at -160,873,304 CNY, reflecting accelerated operating and project-related costs as the company scales its environmental protection and energy-conservation initiatives. Net income was 267,017,793 CNY, a YoY increase of 88.14% and QoQ increase of 101.02%, largely supported by a substantial contribution from other income and expenses totaling 477,069,711 CNY that offset operating losses and lifted pre-tax profitability to 316,196,407 CNY. Management commentary (where disclosed) in the period highlighted ongoing project execution and a rich project pipeline across FGD/denitrification, water treatment, and energy-management contracts, with emphasis on securing long-term contracts that improve visibility and cash generation.

From a liquidity and capital structure standpoint, the group generated robust operating cash flow of 602,632,328 CNY, delivering free cash flow of 535,756,387 CNY. Capital expenditure amounted to 66,875,941 CNY, while net cash used in investing activities was 68,179,941 CNY and financing activities consumed 241,435,004 CNY. Cash and cash equivalents totaled 1,538,657,000 CNY at period-end, with net debt of 3,518,102,000 CNY and total debt of 5,056,759,000 CNY. The balance sheet shows total assets of 16,897,809,000 CNY and total liabilities of 9,450,013,000 CNY, yielding an equity base of 7,647,139,000 CNY. Leverage metrics remained elevated but manageable, with a debt ratio of 0.299 and a debt-to-equity ratio of 0.661. Note on profitability: despite positive net income, operating margins remain negative (operating margin -11.29%), underscoring ongoing investments and project-related costs. Valuation multiples reflect a discounted earnings profile (P/B ~0.254; P/E ~1.821; P/S ~1.366; EV/FCF ~3.63).

Overall, QQ2 2024 signals a revenue-led improvement in scale and cash generation, but the earnings quality hinges on sustaining and widening operating profitability and reducing non-operating headwinds to translate top-line momentum into durable earnings growth.