洪城环境：涨价弹性、高ROE/高分红，或重塑估值

Investment Rating - The report assigns a positive investment rating to Hongcheng Environment (600461 CH) based on its strong market position and growth potential in the public utility sector [5][6]. Core Views - Continuous water price adjustments are expected to enhance the company's performance, with 27 regions adjusting water prices since October 2023. A 15% increase in water and sewage prices could lead to profit elasticity of 11% and 28% respectively for Hongcheng Environment [5]. - The company holds a leading position in profitability and asset quality within the industry, controlling over 80% of the sewage treatment market in Jiangxi Province. The integrated investment in plant and network amounts to 3.7 billion, with some projects expected to achieve an internal rate of return (IRR) exceeding 9% [5][6]. - High dividend payouts are anticipated to elevate the valuation center, with a static dividend yield maintained above 5% from 2020 to 2023. The company has committed to a dividend payout ratio of no less than 50% for the years 2021-2023 and 2024-2026, indicating a strong focus on shareholder returns [6][7]. Summary by Sections Company Overview - Hongcheng Environment operates in water supply, sewage treatment, gas energy, and solid waste management, with a total of 10 water plants and a supply capacity of 1.94 million tons per day, serving a population of 4 million [11][12]. Financial Performance - From 2011 to 2023, the company's revenue grew at a compound annual growth rate (CAGR) of 19%, while net profit grew at a CAGR of 21%. The revenue in 2016 saw a significant increase of 91% due to the acquisition of the Nanchang Gas Group [17][19]. - The company's gross profit has shown steady growth, with a CAGR of 18% from 2011 to 2023, primarily driven by the sewage treatment segment, which has a gross profit CAGR of 16% [22][33]. Market Position - Hongcheng Environment maintains a dominant market share in Jiangxi Province, with over 80% in sewage treatment and more than 90% in gas services in Nanchang. The company has over 80 years of experience in water supply management [27][42]. Future Growth Potential - The company plans to expand its direct drinking water projects, aiming for a daily supply of 400 tons by the end of 2024, which is expected to become a new growth point for its water supply business [37].