Chuangye Environmental Protection 2025 Annual Report Analysis: Operating Cash Flow Surges by 138.95%, Sales Expenses Soar by 67.43%

Operating Revenue: Slight Decrease of 1.40%, Significant Business Structure Differentiation

In 2025, Chuangye Environmental Protection achieved operating revenue of 4.76 billion yuan, a year-on-year decrease of 1.40% from 4.83B yuan in the same period last year. Revenue scale remains relatively stable but has slightly contracted.

Looking at business segments, wastewater treatment and water plant facility construction remain the core sources of income, generating 3.46B yuan, accounting for 72.65% of total revenue, down 3.47% year-on-year; recycled water treatment and supporting projects earned 250 million yuan, a sharp decline of 34.44% year-on-year, which is the main drag on revenue decline. However, heating and cooling supply and related facility construction services earned 195 million yuan, up 19.90%; tap water supply and water plant facility construction earned 75 million yuan, up 18.41%, showing some growth vitality in emerging businesses.

Net Profit: Steady Growth of 6.83%, Improvement in Profit Quality

In 2025, net profit attributable to shareholders of the listed company was 862 million yuan, a year-on-year increase of 6.83% from 807 million yuan last year; net profit after deducting non-recurring gains and losses was 770 million yuan, up 6.50%, with profit scale steadily expanding.

From the perspective of profit quality, the growth rate of net profit exceeds that of revenue, mainly due to effective cost control: operating costs increased only 1.07% year-on-year, lower than revenue decline; financial expenses decreased 16.43% year-on-year, effectively offsetting the impact of revenue decline.

Earnings Per Share: Basic EPS of 0.55 Yuan, Up 7.84%

In 2025, the company’s basic earnings per share was 0.55 yuan/share, a 7.84% increase from 0.51 yuan/share last year; non-recurring EPS was 0.49 yuan/share, up 6.52%. The growth in EPS is basically synchronized with net profit growth, and shareholder return levels are steadily improving.

Cost Side: Sales Expenses Surge Significantly, Management, R&D, and Financial Expenses All Decrease

In 2025, the company’s total period expenses amounted to 606 million yuan, down 9.55% from 670 million yuan last year, indicating significant cost control effectiveness, but with notable structural differentiation:

The sharp increase in sales expenses warrants caution, possibly reflecting intensified market competition in hazardous waste disposal, rising customer acquisition costs. Future focus should be on whether the profitability of this business can cover the expense growth.

R&D Personnel: Stable Team with Structural Optimization

As of the end of 2025, the company had 286 R&D personnel, accounting for 12.27% of the total staff, maintaining a stable team size. In terms of educational background, there are 3 PhDs, 56 master’s degree holders, and 216 undergraduates, with 96.15% holding a bachelor’s degree or above, indicating a high overall educational level. Age-wise, 139 are aged 30-40, and 102 are aged 40-50, totaling 84.27%, mainly mid-career young and middle-aged staff, combining experience and vitality, providing solid support for technological innovation.

Cash Flow: Operating Cash Flow Surges, Investment and Financing Cash Flows Contract

In 2025, the company’s cash flow showed an “one increase, two decreases” pattern:

The significant increase in operating cash flow greatly improved the company’s financial position, with the ending balance of cash and cash equivalents reaching 4.72B yuan, up 71.12% from the beginning of the year, significantly enhancing risk resistance. However, the net outflow of investing cash flow expanded, requiring attention to the return efficiency of project investments; the narrowing of net outflow in financing cash flow reflects reduced financing needs, easing capital pressure.

Potential Risks: Multiple Risks Coexist, Need to Watch for Government Credit and Market Competition Risks

2. Government Credit Risk: The service fees for wastewater treatment and other businesses mainly depend on government payments. If local fiscal revenue and expenditure worsen, it may lead to delayed or insufficient payments, directly affecting the company’s cash flow and profitability stability.

3. Policy and Market Risks: Environmental protection industry policies are frequently adjusted; PPP models and other business modes may be impacted by policy changes. Meanwhile, industry growth is slowing, and the trend of local water utilities becoming larger is evident, intensifying market competition. The company faces pressure in business transformation and market share competition.

4. Operational Management Risks: Stricter environmental standards require the company’s wastewater treatment plants to upgrade continuously, increasing operational costs. Business models such as sludge disposal still need improvement, with risks of operational efficiency not meeting expectations.

5. Legal Risks: Franchise projects and construction projects may involve contract disputes. Mishandling could lead to litigation risks, affecting the company’s reputation and financial health.

Executive and Management Compensation: Performance-Based Compensation for Core Management

In 2025, the company’s core management compensation was as follows:

• Chairman Tang Fusheng: During the reporting period, received a pre-tax total compensation of 0 yuan from the company, paid by affiliated party Tianjin Urban Investment Group.
• General Manager Zhang Jian: During the reporting period, received a pre-tax total compensation of 957.6k yuan, a significant increase from 331.7k yuan for former general manager Zhou Jingdong, mainly due to Zhang Jian’s full-year performance and salary system adjustment.
• Vice Presidents: Peng Yilin, Niu Bo, Zhao Xi, Jiang Xiaochuan received pre-tax compensations of 874.9k yuan, 885.6k yuan, 874.9k yuan, and 445.9k yuan respectively, with salary levels linked to responsibilities and company performance.
• Chief Financial Officer Nie Yanhong: Pre-tax total compensation was 831.6k yuan, roughly unchanged from last year.

Overall, the management team’s compensation system is closely tied to company performance and individual duties, helping to motivate management to improve operational results.

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