The Zhitong Finance App learned that Bank of America Securities released a research report stating that maintaining the Everbright Environment (00257) “buy” rating, the target price is HK$6.8, and the current price is HK$5.29.
The bank emphasized that Everbright Environmental plans to list A-shares in the second to third quarter of 2027. This move is expected to drive a 38% increase in dividend per share (DPS) compared to 2025 to support its A-share issuance plan. The company expects to compensate for the share dilution effects that may be caused by issuing new shares by increasing dividends.
The report mentioned that according to the regulations of the State Assets Administration Commission in 2019, when a state-owned enterprise issues new shares, the issue price must be higher than 1 times the net market ratio (P/B). Everbright Environmental management believes that to be included in an A-share dividend ETF, a dividend ratio of at least 4% is required. The bank believes that the current net market ratio of Everbright Environmental H shares is about 0.6 times. If it is to meet the requirements of 1 times the net market ratio of A shares and a 4% dividend ratio, the current dividend ratio of H shares will reach 7% or more, which is attractive.
Looking ahead to 2026, the bank expects Everbright Environmental's free cash flow to reach HK$6 billion, operating cash flow of HK$11 billion, capital expenditure of HK$3 billion, and financial costs of HK$2 billion. The ample free cash flow is sufficient to support the current annual dividend payment of approximately HK$2 billion. In addition, the company has maintained a stable operating project and has an investment project reserve of 6.4 billion yuan from 2026 to 2028, which helps maintain project construction profits.
The report also pointed out that since Chairman Wang took office in the second half of 2024, Everbright Environment has listed overseas expansion as a key development direction in the “15th Five-Year Plan”, with the goal of investing in waste-to-energy projects and sales of related equipment in the “Belt and Road” markets. Up to now, the company has successfully obtained two overseas projects with a total investment of RMB 3.4 billion. Management emphasized that an internal return on equity (IRR) of no less than 10% will be the target.