SINGAPORE (Feb 28): RHB is maintaining “buy” for China Everbright Water expecting the worst to be over for its business while it should be able to look towards Zhenjiang Sponge City Project for growth next year.

While construction work for the Sponge City project only began towards end 2016, RHB expects the bulk of it to be recognised in FY17. In a Tuesday report, analyst Juliana Cai project expects the bulk of the investment value of RMB1.4 billion ($286.4 million) to be recognised in FY17.

That should help China Everbright overcome rising competitiveness in the wastewater treatment industry. As the group only managed to secure new capacity of 485,000 tonnes recently which is less than half of management’s target of 1 million tonnes, Cai believes achieving management’s target of hitting 10 megatonnes of capacity by 2020 could prove difficult.

Excluding one-off forex losses, FY16 results came in line with RHB’s expectations though. However, the research house has trimmed its FY17-18 earnings by 12-14%.

“We have only factored in 500,000 tonnes of newly secured capacity per annum between FY17-19. Any additional capacity would be an upside to our target price of 54 cents,” says Cai.

As at 10.34am, shares of China Everbright are trading at 44 cents.