Datang Environment (1272.HK) Q2 2025 Earnings Report

Datang Environment Industry Group delivered a solid revenue rebound in QQ2 2025, with revenue of 2.542 billion CNY, up 115.7% year over year, supported by a high gross margin foundation and a sizeable non-operating boost to net income. The quarter closed with an EBITDA of 596.8 million CNY and an EBITDA margin of 23.5%, while operating income remained negative at -362.6 million CNY, driven by ongoing project mix and one-off non-operating gains. Net income stood at 274.2 million CNY, translating to a net margin of 10.8% and basic earnings per share of 0.0914 CNY. The company generated robust operating cash flow of 638.6 million CNY and free cash flow of 605.3 million CNY, underpinning a strong liquidity position despite a leveraged capital structure.

From a balance-sheet perspective, Datang reports total assets of 14.83 billion CNY and stockholders’ equity of 7.85 billion CNY. Cash and cash equivalents totaled 1.41 billion CNY at quarter end, with total debt of 3.65 billion CNY and net debt of 2.24 billion CNY, yielding a debt-to-equity ratio of 0.46 and a debt-to-capitalization ratio of 0.317. Current ratio stands at 1.25 and the quick ratio at 1.22, indicating adequate liquidity while a notably high days sales outstanding (DSO) of ~222 days signals working-capital concentration risk.

The earnings trajectory is heavily influenced by a large other income line (approximately 741.7 million CNY) that more than offsets the negative operating income. Excluding this non-operating item would imply a materially different profitability profile for QQ2 2025. Management commentary is not provided in the available data, limiting explicit guidance. Given China’s ongoing environmental upgrade cycle, FGD/denitrification, water treatment, and energy-conservation projects remain supporting growth themes, though execution risk and customer-collections risk warrant monitoring. Overall, the stock trades at attractively low cash-flow- and earnings-based multiples (P/E ~2.95x, P/B ~0.41x), but investors should adjust for the quality and sustainability of the non-operating income and the structural leverage in the balance sheet.