Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 6.58, representing a potential upside of 39.3% from the current price of HKD 4.72 [3][5]. Core Insights - The company's net profit for the fiscal year 2023/24 is expected to decline by 12.6%, with total revenue decreasing by 9.4% to HKD 12.86 billion. Excluding currency fluctuations, the revenue decline is 4.1% [3][4]. - Despite the decline in overall performance, core businesses such as water supply, direct drinking water, and environmental services remain robust, indicating a pathway to high-quality development [3][6]. - The direct drinking water segment saw a revenue increase of 31.4% to HKD 1.72 billion, now accounting for 13.2% of total revenue, with over 3,000 new projects added during the period [3][4]. - The water supply business experienced a slight revenue decline of 5.8% to HKD 8.90 billion, but the company anticipates significant revenue growth from over 20 water price adjustment projects currently in progress [3][6]. - The environmental segment's revenue decreased by 35% to HKD 1.03 billion, primarily due to the completion of large projects, but is expected to rebound with the upcoming production of the Mobil project [3][4]. Financial Summary - For the fiscal year 2023/24, the company reported a net profit of HKD 2.59 billion, down 16.1% year-on-year, with a core net profit decline of 4.0% when excluding currency impacts [3][4]. - The EBITDA margin improved slightly by 0.1 percentage points to 40.1%, indicating operational efficiency despite revenue challenges [3][4]. - The company plans to maintain a dividend payout ratio of 30%, with a proposed final dividend of HKD 0.15 per share [3][4]. Future Projections - The company is projected to achieve net profits of HKD 1.70 billion, HKD 1.93 billion, and HKD 2.12 billion over the next three fiscal years [3][4]. - The anticipated reduction in capital expenditures due to the commencement of trial production for approximately 800,000 tons of capacity in the water supply and environmental sectors is expected to improve the financial structure and cash flow [3][6].
中国水务：23/24财年业绩承压，核心业务仍稳健，步入高质量发展