中国水务行业展望，2025年1月

Investment Rating - The report maintains a stable outlook for the Chinese water industry, reflecting the expectation that the overall credit quality will not undergo significant changes in the next 12 to 18 months [6][47]. Core Insights - The water industry in China is expected to see policy focus shift towards water conservation, sewage treatment, water pricing adjustments, and water conservancy construction in 2024. This is anticipated to improve the profitability of water companies as water prices are expected to rise [6][29]. - The report highlights that while the net profit levels of water companies may improve slightly in 2024, the collection period for payments has lengthened significantly, leading to weakened cash flow and debt repayment indicators [6][33]. - The report emphasizes the need for water price adjustments due to rising operational costs and the unsustainability of fiscal subsidies, with a broader implementation of price increases expected in 2025 [29][30]. Summary by Sections Industry Fundamentals - The total water resources in China have continued to decline, with a total of 25,782.5 billion cubic meters reported in 2023, which is 6.6% below the average [9]. - The per capita water resource amount is only 1,756.6 cubic meters, representing a decrease of 8.42% year-on-year, categorizing the country as moderately water-scarce [9][11]. - The government has introduced various policies to enhance water resource management and efficiency, including the first administrative regulations on water conservation expected to be published in 2024 [10]. Financial Performance - In 2024, water companies are expected to see a slight improvement in net profit levels, but the overall debt scale and financial leverage are projected to continue increasing due to prolonged payment collection periods [33][46]. - The average cash flow from operating activities for sample companies has shown a decline, indicating weakened cash generation capabilities [42]. - The report notes that the average asset-liability ratio for water companies is 62.94%, reflecting the capital-intensive nature of the industry [39]. Conclusion - The report concludes that the Chinese water industry is stable, with expectations for gradual improvements in profitability driven by policy changes and operational adjustments. However, challenges such as rising costs and payment collection issues remain [46][47].