Cleanaway Waste Management (CWY) is an Australian-based waste management, industrial and environmental services company. The company has a team of more than 6,600 trained staff and are supported by a fleet of over 5,000 specialist vehicles working from 250 locations across Australia. The Group comprises three operating segments, being Solid Waste Services, Industrial & Waste Services and Liquid Waste & Health Services. We maintain our $2.20 fair value estimate for Cleanaway following FY23 results. Underlying EBIT rose 18% to $302 million, in line with our expectations. This was largely driven by net revenue up 14% to $3.0 billion on price increases and recent acquisitions, and margin expansion on easing cost pressures in labour, fuel, and old corrugated cardboard prices. The firm’s focus is still on margin recovery through efficiency and productivity improvements at its sites.
With conditions stabilising, management unveiled a FY26 EBIT target of at least $450 million, matching our estimates. Shares remain overvalued, trading at a premium to our fair value estimate. We think investors are paying too much for a company that persistently demonstrates low levels of organic growth, low-single-digit return on equity, low return on assets and capital-intensive growth—driven by bolt-on acquisitions, and large, planned capital projects such as energy from waste, and brownfield infrastructure investment. We also observe limited ability for margin-accretive price increases and challenged long-term margins due to a lack of any competitive advantage in operating costs or contracting. Our long-term outlook for solid waste services is unchanged. We expect low but resilient growth in solid waste volumes, complemented by an increased ability to internalise waste following recent acquisitions.