Investment Rating - The report maintains a "Buy" rating for China Water Affairs (855 HK) with a target price raised to HKD 7.22, indicating a potential upside of 24.1% from the current price of HKD 5.82 [4][6]. Core Insights - The economic stability in China is expected to enhance the attractiveness of public utility stocks, with the wastewater treatment revenue significantly increasing by 76.8% year-on-year to HKD 320 million in the first half of FY25, primarily driven by the ExxonMobil petrochemical wastewater treatment project [1]. - The upward adjustment of water prices aligns with market-oriented policy principles, as over 20 cities have initiated price adjustment procedures, reflecting a trend towards increased water pricing [2]. - The company anticipates an increase in its dividend payout ratio, projected to reach at least 30% due to reduced capital expenditures and a decline in construction revenue [3]. Financial Summary - For FY25, the company forecasts a revenue of HKD 12.284 billion, a decrease of 4.5% compared to the previous year, with a net profit of HKD 1.475 billion, reflecting a decline of 3.8% [5][11]. - The expected earnings per share (EPS) for FY25 is HKD 0.90, with a price-to-earnings (P/E) ratio of 6.4 times [5][11]. - The projected dividend per share is HKD 0.27, resulting in a dividend yield of 4.6% [5][11]. Revenue Breakdown - The operational revenue is expected to grow at a compound annual growth rate (CAGR) of 9.2% from FY24 to FY27, with wastewater treatment revenue projected to increase significantly [10]. - The company’s construction revenue is anticipated to decline, contributing to a shift in revenue sources towards operational income [10][11].
中国水务：经济稳增长，公用红利价值吸引-20250313