Core Viewpoint - Beikong Water Group reported a decline in revenue and profit for the fiscal year ending December 31, 2024, primarily due to reduced contributions from BOT water service projects [1][2] Financial Performance - The company recorded a revenue of 24.27 billion RMB, a year-on-year decrease of 1.02% [1] - Shareholder profit was 1.678 billion RMB, down 11.5% year-on-year [1][2] - Basic earnings per share were 15.63 cents [1] Dividend Information - The company proposed a final dividend of 0.091 HKD per share, reflecting a year-on-year increase of 2.5% [1][2] - The dividend payout ratio increased by 16.8 percentage points to 95.2% [1] Cash Flow and Profit Quality - Cash-generating business revenue accounted for 85.8% of total earnings, up 7.8 percentage points year-on-year [1] - Free cash flow increased by 35% to 1.48 billion RMB, with a target to increase by another 1 billion RMB this year [1] Market Analysis - Citigroup noted that the profit decline was not concerning due to higher non-cash impairment losses, indicating improved profit quality [1] - Huatai Securities highlighted that the net profit was below their expectation of 1.876 billion RMB, mainly due to increased impairment losses [2]

Investment Rating - The report maintains a "Buy" rating for the company [2][8]. Core Views - The company's revenue decreased due to a decline in construction income, while the total dividend payout saw a slight increase. Capital expenditures continue to contract, leading to improved free cash flow [3][8]. Financial Summary - In 2024, the company achieved revenue of 24,270 million RMB, a year-on-year decline of 1%. The net profit attributable to shareholders was 1,678 million RMB, down 12% year-on-year. The decline in revenue was primarily due to a 42% drop in BOT water project construction income, which amounted to 2,616 million RMB [8]. - The total dividend payout for the year was 1,435 million RMB, slightly up from 1,420 million RMB in 2023 [8]. - The overall gross margin remained stable at 37%, while management expenses decreased by 7% to 3,071 million RMB [8]. Operational Performance - The company operated sewage treatment capacity of 19.65 million tons and recycled water plants of 2.09 million tons in 2024, with sewage treatment volume increasing by 5%. The average contract price for water treatment rose to 1.54 RMB/ton from 1.49 RMB/ton in 2023, with a gross margin increase of 2 percentage points to 57% [8]. - The operational water supply capacity was 10.24 million tons, with a 2% increase in supply volume. The actual average contract price for water supply remained stable at 2.15 RMB/ton, while the gross margin decreased by 5 percentage points to 40% due to increased amortization from more water pipe construction and renovation [8]. - Revenue from technical services and equipment sales reached 2,549 million RMB, a 4% year-on-year increase, with a gross margin of 42%, down 1 percentage point [8]. - Urban resource service revenue grew by 19% year-on-year to 6,028 million RMB, with a gross margin of 19%, down 1 percentage point [8]. Capital Expenditure - The company's total capital expenditure for 2024 was 4,105 million RMB, a significant decrease from 6,990 million RMB in 2023. Of this, 1,694 million RMB was allocated for the acquisition of property, plant, and equipment, while 2,350 million RMB was used for the construction and acquisition of water plants [8].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 2.74 [7]. Core Views - The company reported a revenue of RMB 24.27 billion for 2024, a decrease of 1.0% year-on-year, primarily due to a decline in contributions from BOT water projects. The net profit attributable to shareholders was RMB 1.678 billion, down 11.5% year-on-year, which was below expectations due to increased impairment losses. The dividend per share (DPS) for 2024 is set at HKD 0.161, a 2.5% increase from 2023, resulting in a dividend yield of 6.9% based on the closing price on March 27, 2025 [1][4]. Revenue and Profitability - The wastewater and reclaimed water treatment service revenue increased by 6% to RMB 9.18 billion, driven by new water volume from plants that commenced operations during the year. However, the water governance construction service revenue fell by 36% to RMB 3.44 billion, with BOT plant construction revenue down 42% to RMB 2.62 billion, reflecting the company's strategy to reduce investments in line with its asset-light transformation [2][3]. Cash Flow and Dividend Policy - The company has maintained positive free cash flow for three consecutive years. The capital expenditure for 2024 is expected to decrease by 41% to RMB 4.11 billion, with further reductions anticipated. The implementation of user-pay trends and potential increases in water prices are expected to contribute positively to performance. The payout ratio for dividends is projected to reach 94% in 2024, indicating strong potential for future dividend increases as free cash flow improves [3][4]. Earnings Forecast - The report revises down the earnings forecast for the company, projecting net profits attributable to shareholders of RMB 1.543 billion, RMB 1.643 billion, and RMB 1.724 billion for 2025, 2026, and 2027 respectively. The expected earnings per share (EPS) for 2025 is RMB 0.15, with a target price based on a 16.5x PE ratio for 2025 [4][6].

Financial Performance - For the year ending December 31, 2024, the company's profit attributable to shareholders decreased by 11.5% to RMB 1,677,600,000 from RMB 1,895,700,000 in the previous year[4]. - The company's EBITDA was RMB 8,525,300,000, a decrease of 4.5% compared to RMB 8,931,300,000 last year[4]. - The total revenue for the year was RMB 24,270,499,000, down from RMB 24,519,374,000 in the previous year, representing a decline of approximately 1.0%[5]. - The gross profit for the fiscal year 2024 was RMB 8,989,098,000, slightly down from RMB 9,000,753,000 in 2023, indicating a stable gross margin[18][19]. - The net profit attributable to shareholders for 2024 was RMB 1,677,600,000, compared to RMB 1,895,681,000 in 2023, reflecting a decrease of approximately 11.5%[19][22]. - The company's operating profit for 2024 was RMB 7,528,297,000, down from RMB 7,841,632,000 in 2023, reflecting a decrease of about 4%[18][19]. - The total tax expense for the year is RMB 812,083,000, a decrease of 15.8% from RMB 964,112,000 in the previous year[26]. - The basic earnings per share for the year is RMB 1.567694 billion, down from RMB 1.825397 billion in the previous year, reflecting a decrease of 14.1%[29]. Dividends and Shareholder Returns - The company proposed a final dividend of HKD 0.091 per share, with a total annual dividend of HKD 0.161 per share[4]. - The proposed final dividend per share is HKD 0.091, an increase from HKD 0.087 in the previous year, resulting in a total proposed dividend of RMB 1,474,902,000[26]. - The board proposed a final dividend of HKD 0.091 per share for the fiscal year ending December 31, 2024, subject to shareholder approval[114]. Assets and Liabilities - The total assets as of December 31, 2024, amounted to RMB 166,571,603,000, compared to RMB 165,493,193,000 in the previous year[9]. - Total equity as of December 31, 2024, is RMB 54,133,475,000, an increase from RMB 31,171,095,000 in 2023[10]. - Total liabilities decreased slightly to RMB 110,609,173,000 from RMB 111,359,718,000 year-over-year[10]. - The company’s bank and other borrowings decreased to RMB 10,366,940,000 from RMB 13,145,188,000[10]. - The company’s total non-current liabilities increased to RMB 68,861,047,000 from RMB 67,340,367,000[10]. - The company’s total current liabilities decreased to RMB 42,498,671,000 from RMB 43,268,806,000[10]. - The group recorded revenue of RMB 828,200,000 from integrated governance projects, a slight decrease from RMB 839,900,000 in the previous year, with net profit from these projects dropping to RMB 490,000,000[61]. Revenue Streams - The company reported a significant increase in revenue from wastewater and recycled water treatment services, reaching RMB 9,178,030,000 in 2024, up from RMB 8,643,409,000 in 2023, marking a growth of 6.2%[22]. - The revenue from construction services decreased significantly to RMB 3,444,184,000 in 2024 from RMB 5,380,463,000 in 2023, a decline of approximately 36.1%[22]. - The revenue from urban services increased to RMB 5,310,493,000 in 2024, compared to RMB 4,343,559,000 in 2023, showing a growth of 22.2%[22]. - The total interest income from service concession arrangements was RMB 3,100,665,000 in 2024, up from RMB 3,023,301,000 in 2023, indicating a positive trend in this revenue stream[22]. - The water treatment services segment generated revenue of RMB 12,249.2 million, an increase of 5% from RMB 11,622.2 million in 2023[45]. - The technology services and equipment sales segment reported revenue of RMB 2,549.4 million, a 4% increase from RMB 2,459.1 million in 2023[45]. Operational Efficiency and Management - Management and financial expenses have been continuously reduced, contributing to improved operational efficiency[4]. - The company has been recognized as the top influential enterprise in China's water industry for 14 consecutive years[4]. - The company is actively promoting the research and development of new technologies and processes, including AOA, to enhance water plant quality and efficiency[4]. - The company has changed its functional currency from HKD to RMB to better reflect its economic substance[12]. - The group aims to enhance customer communication and experience, focusing on responsible marketing and improving customer satisfaction[105]. - The group is committed to building a sustainable development partner network, integrating sustainability into the entire lifecycle management of suppliers[105]. Employee and Corporate Governance - As of December 31, 2024, the total employee cost was RMB 5,615,717,000, an increase from RMB 5,330,504,000 for the previous year[107]. - The group employed 85,870 employees as of December 31, 2024, including 67,219 from North Control Urban Resources[108]. - The board consists of seven executive directors, one non-executive director, and five independent non-executive directors as of the announcement date[128]. - The audit committee, consisting of three independent non-executive directors, has reviewed and approved the financial results for the year ending December 31, 2024[119]. Future Outlook and Strategic Initiatives - The group has planned a systematic digital transformation project for 2024, focusing on operational efficiency and data service analysis, aiming for comprehensive digital transformation in financial management[103]. - The establishment of two technology platforms, North Water Technology and North Water Cloud Service, aims to enhance sustainable development and digital transformation in the water industry[102]. - The company will suspend share transfer registration from June 12 to June 13, 2025, to qualify for the proposed final dividend[116].

Financial Performance - The group achieved a total revenue of RMB 11,308,811,000, a decrease of 6% year-on-year, and a net profit attributable to shareholders of RMB 1,122,088,000, down 18% year-on-year[5]. - The company's net profit attributable to shareholders decreased by 18% to RMB 1,122.1 million due to a 6% decline in revenue to RMB 11,308.8 million, primarily from reduced contributions from BOT water service projects[10]. - Total revenue for the group reached RMB 12,083.1 million, a decrease of 6% compared to RMB 12,083.1 million in the previous period[21]. - The total revenue for the period was RMB 4,176,700,000, with a net profit attributable to shareholders of RMB 2,091,700,000[33]. - The net profit for the period was RMB 1,767,787, compared to RMB 1,957,647 in the previous year, indicating a decrease of approximately 9.7%[76]. - The total comprehensive income for the period was RMB 1,261,091, significantly higher than RMB 196,109 in the same period of 2023, showing a substantial increase[77]. - The company reported a net financial cost of RMB 1,542.6 million, impacting overall profitability[18]. - The company reported a total comprehensive income of RMB (30,965) thousand for the period, reflecting a significant change from the previous year's comprehensive income[84]. Revenue Breakdown - The revenue from water treatment services in China reached RMB 4,176.7 million, contributing to a gross margin of 37%[11]. - The revenue from urban resource services amounted to RMB 2,687.8 million, with a gross margin of 24%[13]. - The total revenue from technology services and equipment sales was RMB 1,151.4 million, with a gross margin of 10%[13]. - Revenue from construction BOT water projects was RMB 2,903.9 million, a significant decrease of 57% compared to the previous period[23]. - The revenue from urban resource services increased by 20% to RMB 2,687.8 million compared to RMB 2,236.2 million in the previous period[23]. - Revenue from BOT water projects decreased to RMB 1,257,600,000, with profit attributable to shareholders dropping to RMB 159,200,000 due to a focus on light-asset projects[43]. - Revenue from wastewater and recycled water treatment services was RMB 4,384,504,000, an increase from RMB 4,200,741,000 in the previous year[104]. Operational Capacity and Projects - The design capacity of new projects reached 510,350 tons/day, contributing to a total design capacity of 44,000,174 tons/day[5]. - The group achieved a total daily processing capacity of 44,000,174 tons across 1,457 water treatment facilities as of June 30, 2024[26]. - The group secured approximately 410,000 tons/day of new light asset projects, including recycled water sales and entrusted operations, in the first half of 2024[5]. - The company established two service concession agreements for multiple township sewage treatment projects, with a total daily processing capacity of 24,500 tons[26]. - The company has a total of 1,217 sewage treatment plants and 72 recycled water treatment plants in operation[27]. - The company operates 334 sewage treatment plants in the southern region of China with a total design capacity of 4,605,005 tons, generating revenue of RMB 870,800,000 and a profit of RMB 402,500,000[34]. - In the western region of China, the company operates 323 sewage treatment plants with a total design capacity of 2,844,810 tons, achieving revenue of RMB 783,600,000 and a profit of RMB 350,800,000[35]. Strategic Initiatives - The group is committed to integrating technology development into its platform strategy to drive asset-light transformation and improve core competitiveness[4]. - The company aims to enhance its "new content," "green content," and "gold content" as part of its strategic focus on asset-light transformation in 2024[9]. - The group is enhancing its pricing management capabilities to support water service companies in adjusting water prices to reflect true supply costs[5]. - The group has implemented a systematic review of regional integration trials, advancing changes in 18 regions to enhance operational capabilities and support the upgrade of the "cloud-chain-end" operational model[7]. - The company is pushing for digital transformation to integrate business and financial systems, supporting data analysis for refined management[8]. Financial Management and Costs - The company achieved a historical low in bond financing rates with a 3-year Panda bond issuance, effectively reducing financial costs and maintaining reasonable liquidity[7]. - The company reported a decrease in cash and cash equivalents to RMB 8,953,739 from RMB 10,215,161 at the end of 2023, a decline of about 12.4%[80]. - The company incurred RMB 346,668 thousand for the purchase of property, plant, and equipment, a decrease from RMB 575,981 thousand in the same period of 2023[86]. - The company recognized a tax payment of RMB 418,860 thousand for corporate income tax in mainland China, compared to RMB 362,901 thousand in the previous year[86]. - The company reported a total of RMB 60,570,637,000 in total settled accounts as of June 30, 2024, up from RMB 59,037,045,000[117]. Shareholder Returns and Dividends - The group plans to distribute an interim cash dividend of HKD 0.07 per share to reward shareholders for their continued support[5]. - The interim cash dividend declared on August 28, 2024, was HKD 0.07 per share, totaling approximately RMB 642,942,000, an increase from RMB 632,936,000 in the previous year[110]. - The company declared cash dividends during the period, details of which are disclosed in note 7[76]. Governance and Compliance - The audit committee, consisting of three independent non-executive directors, has reviewed and approved the unaudited interim results for the six months ending June 30, 2024[185]. - The company has adhered to the corporate governance code as per the Hong Kong Stock Exchange rules for the six months ending June 30, 2024[183]. - The board is responsible for assessing risks and ensuring effective risk management and internal control systems are in place[186]. - The risk management center is tasked with establishing mechanisms to identify, control, and manage risks faced by the group[187]. Related Party Transactions and Shareholding - The group has established ongoing related party transactions as defined under the listing rules[138]. - The major shareholder, Beikong Environment, holds 4,121,604,070 shares, representing approximately 41.03% of the company's issued share capital[162]. - The shareholding structure indicates significant control by Beijing Holdings and its subsidiaries, with a combined ownership of approximately 41.54%[162].

Investment Rating - Maintains an "Overweight" rating for the company [2] Core Views - The company's capital expenditure has significantly decreased, leading to a substantial year-on-year decline in BOT construction revenue, resulting in fluctuations in the 2024 interim performance [4] - Operations remain stable, with water treatment business volume and prices increasing [4] - High dividend payout ratio with stable dividend distribution [4] Financial Performance - 2024 H1 revenue: 11.309 billion RMB, down 6% year-on-year [4] - 2024 H1 net profit attributable to shareholders: 1.122 billion RMB, down 18% year-on-year [4] - Construction service revenue: 1.642 billion RMB, down 49% year-on-year [4] - Operating income from sewage and water supply services showed steady growth [4] Water Treatment Business - Total water treatment design capacity: 44 million tons/day as of H1 2024 [4] - Sewage: 24.84 million tons/day - Water supply: 14.34 million tons/day - Recycled water: 4.52 million tons/day - Seawater desalination: 0.3 million tons/day - Sewage treatment volume increased by 5% year-on-year [4] - Average sewage treatment contract price: 1.51 RMB/ton, slightly up from 1.49 RMB/ton in 2023 [4] - Sewage treatment gross margin improved by 2 percentage points to 59% [4] - Water supply volume increased by 4% year-on-year [4] - Average water supply contract price: 2.16 RMB/ton, slightly up from 2.15 RMB/ton in 2023 [4] - Water supply gross margin decreased by 4 percentage points to 43% [4] BOT Construction - BOT construction revenue: 1.258 billion RMB, down 57% year-on-year [4] - Focus on light-asset projects, reducing investment in BOT water projects [4] Capital Expenditure and Dividends - 2024 H1 capital expenditure: 1.573 billion RMB, significantly down from 3.618 billion RMB in the same period last year [4] - Interim dividend: 0.07 HKD per share, same as last year, with a cash dividend payout ratio of 60% [4] - Trailing twelve-month (TTM) dividend yield: 7.04% [4] Market Data - Current price: 2.23 HKD [5] - 52-week price range: 1.50-2.78 HKD [5] - Current shares outstanding: 10,047 million [5] - Current market capitalization: 22,404 million HKD [5] Financial Forecast - 2024-2026 forecasted net profit: 1.966 billion, 2.040 billion, and 2.150 billion RMB respectively [4] - 2024-2026 forecasted EPS: 0.20, 0.20, and 0.21 RMB respectively [4]

Financial Performance - For the six months ended June 30, 2024, the company's profit attributable to shareholders decreased by 18% to RMB 1,122,100,000 from RMB 1,369,800,000 in the previous period[3]. - EBITDA for the same period was RMB 4,659,700,000, a decrease of 1.5% compared to RMB 4,728,900,000 in the prior period[3]. - Total revenue for the six months was RMB 11,308,811,000, down from RMB 12,083,093,000 in the previous year, representing a decrease of approximately 6.4%[4]. - Gross profit for the period was RMB 4,293,515,000, compared to RMB 4,430,529,000 in the previous year, reflecting a decline of about 3.1%[4]. - The company's operating profit was RMB 3,451,663,000, down from RMB 3,714,404,000, indicating a decrease of approximately 7.1%[4]. - The pre-tax profit for the period was RMB 2,210,823,000, compared to RMB 2,509,514,000 in the previous year, a decline of about 11.9%[4]. - The total comprehensive income for the period was RMB 1,261,091,000, significantly up from RMB 196,109,000 in the previous year[5]. - The net profit attributable to shareholders for the six months ended June 30, 2024, was RMB 1,122,088,000, down from RMB 1,369,754,000 in the same period of 2023, representing a decrease of 18.1%[20]. - The company's net profit attributable to shareholders decreased by 18% to RMB 1,122.1 million due to a reduction in revenue from BOT water service construction projects[45]. - Total operating revenue for the period fell by 6% to RMB 11,308.8 million[45]. Dividends and Shareholder Returns - The company proposed an interim dividend of HKD 0.07 per share, with a payout ratio of 60%[3]. - The interim cash dividend declared is HKD 0.07 per ordinary share, totaling approximately RMB 642,942,000, slightly up from RMB 632,936,000 for the same period last year[31]. - The company declared an interim dividend of HKD 0.07 per share, equivalent to RMB 0.063996 per share, to be paid on October 28, 2024[136]. - Shareholders have the option to receive the interim dividend in RMB, with a deadline for currency choice submission by October 7, 2024[138]. Assets and Liabilities - Non-current assets totaled RMB 125,321,744,000 as of June 30, 2024, compared to RMB 125,108,357,000 at the end of the previous year[7]. - Current assets decreased to RMB 39,999,825,000 from RMB 40,384,836,000, indicating a decline of approximately 1%[7]. - As of June 30, 2024, total equity reached RMB 55,755.629 million, an increase from RMB 54,133.475 million as of December 31, 2023, reflecting a growth of approximately 3%[8]. - The company reported total liabilities of RMB 109,565.940 million, a decrease from RMB 111,359.718 million, indicating a reduction of about 1.6%[8]. - Non-current liabilities amounted to RMB 64,692.572 million, down from RMB 68,861.047 million, representing a decline of approximately 6.3%[8]. - Current liabilities increased to RMB 44,873.368 million from RMB 42,498.671 million, marking an increase of about 5.6%[8]. - The company's total assets as of June 30, 2024, were RMB 120,448.2 million, slightly down from RMB 122,994.5 million at the end of 2023[43]. - Cash and cash equivalents decreased to RMB 8,953,700,000 as of June 30, 2024, down from RMB 10,215,200,000 as of December 31, 2023[117]. - Total borrowings amounted to RMB 73,853,100,000, slightly down from RMB 74,244,700,000 as of December 31, 2023, with bank borrowings at RMB 59,880,500,000[117]. Revenue Sources - The revenue from wastewater and recycled water treatment services for the six months ended June 30, 2024, was RMB 4,384,504,000, an increase of 4.4% from RMB 4,200,741,000 in 2023[24]. - The revenue from construction services decreased significantly to RMB 1,641,703,000 in 2024 from RMB 3,227,715,000 in 2023, a decline of 49.2%[24]. - The total revenue from external customers in mainland China was RMB 10,656,369,000 for the six months ended June 30, 2024, down from RMB 11,450,794,000 in 2023, a decline of 6.9%[22]. - The revenue from water treatment services in China was RMB 4,176.7 million, contributing to a gross profit margin of 59%[46]. - The total revenue from BOT water projects amounted to RMB 1,257,600,000 for the period, a decrease from RMB 2,903,900,000 in the same period last year, with attributable profit to shareholders at RMB 159,200,000, down from RMB 374,600,000[75]. - Revenue from technical services and equipment sales was RMB 1,151,400,000, an increase from RMB 1,051,600,000 year-on-year, contributing 10% to total revenue, while attributable profit decreased to RMB 108,700,000 from RMB 189,000,000[76]. Operational Capacity and Projects - The total daily design capacity of the company's water treatment facilities reached 44,000,174 tons as of June 30, 2024, with 1,457 water plants and sewage treatment facilities in operation[55]. - The company established service concession agreements for multiple township sewage treatment projects, with a total processing capacity of 24,500 tons per day[56]. - The company has expanded its coverage to 20 provinces, 5 autonomous regions, and 4 municipalities in mainland China[54]. - The company operates 1,194 water treatment facilities with a total design capacity of 33,610,847 tons per day, achieving a total processing volume of 4,198,100,000 tons during the period[61]. - The company has 334 wastewater treatment facilities in southern China, with a total design capacity of 4,605,005 tons per day, and recorded a processing volume of 706,200,000 tons[62]. - In the western region of China, the company operates 323 facilities with a design capacity of 2,844,810 tons per day, achieving a processing volume of 399,400,000 tons and revenue of RMB 783,600,000[64]. - The eastern region's facilities increased their design capacity to 5,886,876 tons per day, processing 820,100,000 tons and generating RMB 974,800,000 in revenue[66]. - The company is currently constructing 10 integrated governance projects, with revenue from these projects increasing to RMB 384,100,000 during the period[73]. Cost Management and Expenses - The financial expenses for the six months ended June 30, 2024, totaled RMB 1,565,644,000, slightly increased from RMB 1,542,598,000 in the same period of 2023[27]. - Management expenses decreased to RMB 1,251,700,000, a slight decline of 3% from RMB 1,288,300,000, indicating effective cost control[91]. - Finance costs increased to RMB 1,395,000,000 from RMB 1,314,100,000, primarily due to a slight rise in average interest rates[93]. Corporate Governance and Shareholder Engagement - The company has committed to maintaining high standards of corporate governance to enhance transparency and protect shareholder rights[142]. - The audit committee, consisting of three independent non-executive directors, reviewed and approved the unaudited interim results for the six months ended June 30, 2024[144]. - The interim results announcement will be published on the company's website and the Hong Kong Stock Exchange website[146]. - The company expresses gratitude to all employees for their support and dedication[147].

Financial Performance - For the year ended December 31, 2023, the company achieved a total revenue of RMB 24,519,374,000, representing a year-on-year increase of 14.1%[7] - The company reported a net profit attributable to shareholders of RMB 1,895,681,000, which is a significant increase of 60.5% compared to the previous year[7] - The basic earnings per share for the year were RMB 0.1824[7] - Total operating revenue rose by 14% to RMB 24,519.4 million, with significant contributions from both domestic and overseas water treatment services[14] - The company's net profit attributable to shareholders increased by 60% to RMB 1,895.7 million, driven by increased revenue from water treatment services and the consolidation of Beikong Urban Resources Group since the second half of last year[14] - The group reported a gross profit margin of 47% and a net profit margin of 72% for the year, indicating strong operational efficiency[15] - The gross profit margin improved to 26% in 2023, up from 16% in 2022, indicating a significant enhancement in profitability[26] - The financial expenses for the year totaled RMB 3,260.9 million, impacting overall profitability[16] - The company reported a loss of RMB 938.3 million from the disposal of an associate company, which affected the overall financial performance[21] Operational Capacity and Projects - The company added a new design capacity of 1,548,909 tons per day, bringing the total design capacity to 43,963,124 tons per day as of December 31, 2023[7] - The total daily design capacity of the group's water treatment facilities reached 43,963,124 tons as of December 31, 2023, with operational facilities accounting for 31,606,503 tons[28] - The average daily processing volume for wastewater treatment was 16,405,750 tons, with an average processing rate of 79%[30] - The group established service concession arrangements for a total daily design capacity of 1,548,909 tons during the year, including various BOT, TOT, and BOO projects[27] - The group operates 1,455 water treatment and sewage treatment facilities, including 934 sewage treatment plants and 42 reclaimed water treatment plants in mainland China[29] Strategic Focus and Initiatives - The company is focusing on green and low-carbon transformation in response to national environmental policies, aiming to enhance asset quality and operational efficiency[8] - The company aims to maintain its industry-leading position through technological and management innovations[8] - The company is committed to supporting the construction of a beautiful China by optimizing wastewater management and enhancing water supply operations[8] - The company emphasizes cash flow as a core strategy while enhancing business fundamentals and focusing on customer management and business transformation[7] - The group is focusing on digital capabilities in core business areas, implementing a digital management platform for wastewater treatment plants[12] Shareholder Returns and Dividends - The board of directors declared a final cash dividend of HKD 0.087 per share to reward shareholders for their continued support[7] - The company reported a proposed final dividend of HKD 0.087 per share, following an interim dividend of HKD 0.070 per share distributed on October 19, 2023[140] - The board will consider various factors before declaring dividends, including the group's financial performance, retained earnings, and future expansion plans[108] Governance and Board Composition - The board of directors consists of 9 members, including 4 executive directors and 5 non-executive directors, ensuring compliance with the listing rules[72] - The company appointed Chen Zhao Shi as an independent non-executive director on September 15, 2023, to comply with listing rules regarding board composition[74] - The company has implemented continuous professional development training for directors to enhance their knowledge and skills in corporate governance[76] - The company has established a succession plan for the board, regularly reviewing and identifying suitable candidates with diverse skills[84] - The company’s board is responsible for formulating corporate strategies and overseeing financial performance to achieve strategic goals[75] Risk Management and Compliance - The risk management framework is structured as "three levels + three lines of defense," ensuring effective risk management and internal control systems[101] - The company has implemented a whistleblowing policy to allow employees and stakeholders to report potential misconduct confidentially[105] - The audit committee continuously monitors the effectiveness of the risk management and internal control systems and reports annually to the board[104] - The company has established a comprehensive procedure for handling insider information to ensure compliance with disclosure regulations[106] Employee and Workforce Management - The total employee cost for the year was RMB 5,330,504,000, compared to RMB 4,487,697,000 for the previous year, reflecting an increase in workforce to 76,608 employees[66] - The company provides competitive compensation and benefits to employees based on their merits and performance[96] - The gender ratio among employees is approximately 55% male and 45% female, indicating satisfactory gender diversity within the workforce[83] Financial Instruments and Capital Management - The company has issued medium-term notes with an outstanding principal amount of RMB 2,000,000,000, maturing in January 2026 and January 2029, with annual interest rates of 3.95% and 4.49% respectively[147] - The company has issued bonds with an outstanding principal amount of RMB 1,500,000,000, maturing in April 2029, with an annual interest rate of 3.98%[148] - The total available reserves for distribution to shareholders as of December 31, 2023, amount to RMB 5,156,220,000[152] - The company has a cumulative daily deposit balance limit of HKD 1,520,000,000 under the 2021 deposit service agreement with Beikong Group Finance[194] Market Presence and Expansion Plans - The company plans to expand its market presence and invest in new technologies to enhance service offerings and operational efficiency[16] - The group plans to continue expanding its water treatment services across 20 provinces, 5 autonomous regions, and 4 municipalities in mainland China[27] Environmental and Social Responsibility - The company is committed to environmental sustainability and has established policies to ensure efficient resource utilization[97] - The company is focused on sustainable development and has established a Sustainable Development Committee to oversee its initiatives in this area[128] Communication with Shareholders - The company emphasizes effective communication with shareholders through various channels, including interim and annual reports, investor meetings, and social media updates[114] - The company has established procedures for shareholders to propose resolutions at annual general meetings[112] - The company actively communicated with shareholders through various channels, including the annual general meeting and online platforms, to enhance transparency and provide updates on the group's latest developments[116]

Investment Rating - The report maintains an "Add" rating for the company [2] Core Views - The company reported a 14.1% year-on-year increase in revenue for 2023, reaching 24.52 billion RMB, and a 60.5% increase in net profit attributable to shareholders, totaling 1.90 billion RMB [2] - The company plans to distribute a final dividend of 0.087 HKD per share, with a total payout ratio of 75% for the year [2] - The report anticipates that the company may exceed its performance guidance due to the flexibility in profit margins from water price increases and adjustments in overseas debt structure [2] Financial Summary - Revenue for 2023 was 24,519 million RMB, with a projected growth of 5.2%, 4.3%, and 4.8% for 2024, 2025, and 2026 respectively [3] - Net profit attributable to shareholders for 2023 was 1,896 million RMB, with expected growth rates of 6.6%, 10.3%, and 11.9% for the following three years [3] - The EBITDA margin improved by 3.2 percentage points to 36.4% in 2023 [2] - The company’s total assets were reported at 165.5 billion RMB, with net assets of 31.4 billion RMB [4]

Investment Rating - Maintains an "Overweight" rating [1][3] Core Views - The company is the leading water treatment industry player in China with the largest capacity scale [1] - The sewage and water supply businesses are growing steadily, with increasing volumes and prices [1] - Capital expenditure is entering a downward cycle, improving cash flow and supporting stable high dividends [1] - The company is expected to undergo a revaluation due to its high dividend characteristics [1] Financial Performance - 2023 revenue reached RMB 24.519 billion, a 14% year-on-year increase [1] - 2023 net profit attributable to shareholders was RMB 1.896 billion, a 60% year-on-year increase [1] - The company changed its financial reporting currency from HKD to RMB starting from January 1, 2023 [1] - The consolidated gross margin in 2023 was 36.7%, a 2.7 percentage point decrease compared to the previous year, mainly due to the consolidation of Beijing Enterprises Urban Resources Group [1] Business Operations - Total water treatment capacity reached 43.96 million tons/day by the end of 2023, including 24.86 million tons/day for sewage, 14.33 million tons/day for water supply, 4.47 million tons/day for recycled water, and 0.30 million tons/day for seawater desalination [1] - In 2023, the company treated 6.03 billion tons of sewage and recycled water, a 4% year-on-year increase [1] - The average contract price for sewage treatment in mainland China was RMB 1.49/ton in 2023, compared to RMB 1.47/ton in 2022 [1] - Water supply volume reached 2.31 billion tons, a 4% year-on-year increase, with an average contract price of RMB 2.15/ton in mainland China, compared to RMB 2.13/ton in 2022 [1] - Capital expenditure in 2023 was RMB 6.83 billion, slightly higher than the RMB 6.30 billion in 2022, mainly due to the recovery from the impact of the pandemic on water plant construction in 2022 [1] Dividend Policy - The total dividend for 2023 was RMB 1.42 billion, a 1.68% year-on-year increase, with a cash dividend payout ratio of 75% [1] - The company has maintained a stable annual dividend of approximately HKD 1.58 billion for three consecutive years from 2021 to 2023 [1] - The static dividend yield for 2023 was 8.83%, highlighting the company's high dividend characteristics [1] Financial Forecasts - The forecasted net profits for 2024-2026 are adjusted to RMB 1.966 billion (-10%), RMB 2.040 billion (-12%), and RMB 2.150 billion, respectively [1] - The corresponding EPS for 2024-2026 are RMB 0.20, RMB 0.20, and RMB 0.21, respectively [1]