HONGCHENG WATERWORKS(SH:600461)2024-09-28 23:36Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [5][9][7]. Core Views - The company is recognized as a leading comprehensive environmental operator in Jiangxi, benefiting from multiple injections of quality assets from its parent group, which has led to stable revenue growth and high dividends [16][19][7]. - The company is expected to achieve a net profit of 11.41 billion yuan in 2024, with a corresponding PE ratio of 10, and a target market value of 148 billion yuan, indicating a potential upside of 26% from the current price [5][9][7]. Summary by Sections Company Overview - The company has grown into a leading comprehensive environmental operator in Jiangxi, with significant market shares in water supply, sewage treatment, and gas supply [16][19]. - The company has a strong regional competitive advantage, with over 80% market share in sewage treatment and over 90% in gas supply in Nanchang [16][19]. Financial Data and Profit Forecast - The company reported total revenue of 8,048 million yuan in 2023, with a projected revenue of 8,122 million yuan for 2024, reflecting a year-on-year growth rate of 0.9% [4]. - The net profit attributable to shareholders is expected to reach 1,141 million yuan in 2024, with a growth rate of 5.4% [4]. Water Supply Segment - The company has a water supply capacity of 194 million cubic meters per day, contributing 17% to the company's gross profit in 2023 [6]. - There is potential for revenue doubling through the expansion of direct drinking water services, targeting a capacity of 400 tons per day by 2024 [6]. Sewage Treatment Segment - The company holds over 80% market share in sewage treatment in Jiangxi, with significant room for growth due to ongoing infrastructure improvements [5][6]. - The company has invested 4.15 billion yuan in integrated plant and network projects, which are expected to enhance operational profits [5]. Gas Supply Segment - The company is the largest gas operator in Nanchang, with a market share exceeding 90%, benefiting from a stable pricing mechanism [6][5]. - The gas supply segment is expected to maintain stable profitability due to the improvement in pricing mechanisms [6]. Waste Management Segment - The company has expanded its operations into waste management through acquisitions, including the largest waste incineration project in Nanchang [7]. - The company aims to further enhance its waste management capabilities through additional acquisitions [7]. Investment Analysis - The company is projected to maintain a dividend payout ratio of 50% from 2024 to 2026, with an expected dividend yield of 4.9% in 2024 [5][9]. - The report emphasizes the company's stable cash flow and commitment to high dividends, which are expected to continue [5][9].