CITIC Envirotech Ltd (CEL) last night reported its 1Q16 results, with revenue surging 63% to S$99.5m, meeting 23% of FY16 forecast; this driven by higher EPC revenue (+100% at S$41.4m); membrane sales also jumped 86% to S$22.1m, while recurring treatment revenue grew 26% to S$36.0m. Despite suffering a forex loss of S$4.5m in the quarter, PATMI jumped 60% to S$12.1m, or about 17% of our FY16 estimate; excluding the forex loss, the number would have met around 23% of our forecast.

Going forward, CEL remains upbeat about its prospects in the China water sector, noting the government's increased focus on addressing pollution issues. CEL also intends to further expand its asset portfolio by engaging in strategic and large-scale M&A activities; and on this front, we will be speaking further with management to get more colour.

We currently have a HOLD on the stock with a fair value of S$1.48 (23x FY16F EPS).

Source: OCBC Research - 29 Apr 2016