Zonqing Environmental Limited (1855) AI Stock Analysis

• Market Cap: HK$1.07B
• Dividend Yield: 2.02%
• Average Volume (3M): 18.03M
• Price to Earnings (P/E): 28.4
• Beta (1Y): 0.17
• Revenue Growth: -22.25%
• EPS Growth: -73.66%
• Country: HK
• Employees: 799
• Sector: Industrials
• Sector Strength: 72
• Industry: Engineering & Construction
• EPS (TTM): 0.04
• Shares Outstanding: 825,000,000
• 10 Day Avg. Volume: 27,868,000
• 30 Day Avg. Volume: 18,032,266
• PEG Ratio: -1.91
• Price to Book (P/B): 7.95
• Price to Sales (P/S): 3.05
• P/FCF Ratio: -125.80
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: Hold
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 46 Neutral
• Price Target: HK$1.50 ▲(15.38% Upside)

The overall stock score reflects significant financial challenges, including declining revenues, high leverage, and negative cash flows. Technical analysis indicates bearish momentum, while valuation metrics present a mixed picture with a high P/E ratio and moderate dividend yield. These factors collectively suggest a cautious outlook for the stock.

Positive Factors

Stable Gross Margins

Stable gross margins indicate that the company maintains pricing power and cost control, which can support profitability even amid revenue declines.

Long-term Contracts

Long-term contracts provide predictable and stable cash flows, reducing revenue volatility and enhancing financial planning capabilities.

Government Partnerships

Partnerships with government entities enhance credibility and provide access to funding, supporting large-scale projects and long-term growth.

Negative Factors

Declining Revenues

A significant decline in revenues indicates challenges in market demand or competitive positioning, which can impact long-term growth prospects.

High Leverage

High leverage increases financial risk, potentially limiting the company's ability to invest in growth opportunities and navigate economic downturns.

Negative Cash Flows

Negative cash flows indicate operational inefficiencies and liquidity issues, which can constrain the company's ability to fund operations and growth initiatives.

Zonqing Environmental Limited Business Overview & Revenue Model

Company Description

ZONQING Environmental Limited, together with its subsidiaries, engages in landscaping, ecological restoration, and other related activities in the People's Republic of China. It is also involved in the projects include landscape designing, gardening, and construction works; urban renewal, urban gardens, municipal infrastructure construction, ecological restoration, urban construction maintenance, and sanitation; and investigation, survey, design, and technical consultancy services for municipal construction projects, as well as provision of environmental hygiene services. The company was formerly known as Zonbong Landscape Environmental Limited and changed its name to ZONQING Environmental Limited in December 2022. ZONQING Environmental Limited was founded in 2008 and is headquartered in Changchun, the People's Republic of China.

How the Company Makes Money

Zonqing Environmental generates revenue through multiple streams, including service fees for waste treatment and disposal, contracts for waste-to-energy solutions, and sales from processed materials. The company's primary revenue model is based on long-term contracts with industrial clients and municipalities, providing stable cash flows. Additionally, Zonqing Environmental has established partnerships with government agencies and environmental organizations, which not only enhance its credibility but also facilitate access to funding for large-scale projects. The growing demand for environmental solutions driven by stricter regulations and increased public awareness of sustainability further bolsters the company's earnings potential.

Zonqing Environmental Limited Financial Statement Overview

Summary

Zonqing Environmental Limited faces declining revenues and net income, high leverage, and negative cash flows. Despite stable gross margins, the company's financial health is strained with significant risks tied to its debt levels and cash flow generation capabilities.

Income Statement

The income statement shows a declining trend in revenues and net income over the past year, with total revenue dropping from 2.36 billion to 1.74 billion and net income significantly decreasing from 135.2 million to 39.97 million. However, the gross profit margin remains relatively stable at around 18%, and there is a positive trend in EBITDA margin at approximately 8.7% indicating some operational efficiency. The company faces challenges in revenue growth and profitability, which affects its score.

Balance Sheet

The balance sheet reveals a stable equity position with stockholders' equity increasing slightly to 668.97 million. The debt-to-equity ratio remains high at 1.33, indicating significant leverage, which is a risk factor. However, the equity ratio is stable at about 15.3%, showing a moderate reliance on equity financing. Overall, the balance sheet presents a mixed picture with potential risks due to high debt levels.

Cash Flow

The cash flow statement indicates a concerning trend with negative operating cash flow of 42.25 million. The free cash flow also turned negative, highlighting liquidity issues. The operating cash flow to net income ratio is negative, suggesting operational inefficiencies. This negative cash flow generation significantly impacts the overall cash flow score.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.73B	1.74B	2.36B	1.12B	936.60M	1.00B
Gross Profit	289.67M	314.03M	450.85M	193.75M	211.23M	238.43M
EBITDA	153.06M	151.03M	250.89M	-31.09M	66.03M	142.44M
Net Income	35.05M	39.97M	135.21M	-96.34M	28.53M	68.50M
Balance Sheet
Total Assets	4.51B	4.38B	3.85B	4.18B	2.25B	2.07B
Cash, Cash Equivalents and Short-Term Investments	47.16M	122.78M	210.41M	220.23M	51.53M	144.00M
Total Debt	896.57M	891.75M	809.48M	1.06B	509.23M	480.90M
Total Liabilities	3.69B	3.59B	3.08B	3.26B	1.66B	1.58B
Stockholders Equity	700.73M	668.97M	649.60M	867.75M	585.31M	474.24M
Cash Flow
Free Cash Flow	147.72M	-42.26M	209.37M	86.30M	-104.76M	137.59M
Operating Cash Flow	159.26M	-42.26M	221.53M	99.35M	-101.22M	139.90M
Investing Cash Flow	-81.88M	-79.65M	164.98M	-84.02M	-6.67M	17.27M
Financing Cash Flow	-91.41M	34.27M	-396.33M	116.04M	10.56M	-86.77M

Zonqing Environmental Limited Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 1.30
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:1855, the sentiment is Negative. The current price of 1.3 is below the 20-day moving average (MA) of 1.40, below the 50-day MA of 2.00, and below the 200-day MA of 5.41, indicating a bearish trend. The MACD of -0.19 indicates Negative momentum. The RSI at 32.07 is Neutral, neither overbought nor oversold. The STOCH value of 18.25 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HK:1855.

Zonqing Environmental Limited Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
1556	79 Outperform	HK$525.00M	3.92	17.51%	5.71%	17.51%	1.48%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
2236	52 Neutral	HK$1.61B	5.94	9.56%	―	96.63%	―
1855	46 Neutral	HK$1.07B	28.45	5.09%	2.02%	-22.25%	-73.66%
2193	45 Neutral	HK$109.09M	-5.88	-6.89%	―	-1.91%	18.30%
1707	41 Neutral	HK$58.80M	-3.80	-9.58%	―	3.97%	14.02%

Zonqing Environmental Limited Corporate Events

Zonqing Environmental Renews Key Agreements with ZIHG

Zonqing Environmental Limited has announced the renewal of its continuing connected transactions with ZIHG through a series of framework agreements set to last from January 2026 to December 2028. These agreements, which cover a range of services, are deemed fair and beneficial for the company and its shareholders, with the transactions classified as partially-exempt under the Hong Kong Listing Rules, thus requiring reporting and annual review but not independent shareholder approval.

Zonqing Environmental Updates Share Option Scheme Details

Zonqing Environmental Limited has issued a supplemental announcement regarding its share option scheme, originally adopted on December 14, 2020. The company clarified that the total number of shares available for issue under the scheme is 27,500,000, representing approximately 3.3% of the total shares in issue. However, following a subdivision of shares effective August 1, 2024, this number could increase to 82,500,000 shares, representing about 10.0% of the total shares. This announcement does not affect other information in the 2024 Annual Report.