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][15]. Core Insights - The economic stability in China is expected to enhance the attractiveness of dividend-paying public utility stocks, with China Water Affairs benefiting from increased sewage treatment revenue due to the commencement of operations at the ExxonMobil petrochemical project in Huizhou [1]. - The company is experiencing a trend of water price increases across various projects, supported by new market-oriented policies from the government, which is likely to bolster revenue [2]. - The dividend payout ratio is projected to increase, with expectations of reaching at least 30% in the coming years, providing further investment appeal [3]. Financial Performance 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 company’s operating income is expected to grow significantly in the sewage treatment segment, with a projected increase of 64.8% in FY26 [11]. - The report highlights a decrease in construction revenue by 35.7% in the first half of FY25, leading to reduced capital expenditure expectations [3][5]. Revenue and Profitability Forecast - The revenue distribution indicates a shift towards more stable income sources, with sewage treatment expected to contribute significantly to overall revenue growth [11]. - The report adjusts profit forecasts for FY26 and FY27 upwards by 1.9% and 4.4% respectively, reflecting improved operational performance [4][11]. Market Context - The report notes that over 20 cities have initiated water price adjustment procedures, indicating a broader trend towards higher water tariffs, which will support the company's revenue growth [2]. - The company is positioned to benefit from the ongoing economic recovery in China, which is expected to enhance its valuation in the public utility sector [4].
中国水务（00855）：经济稳增长，公用红利价值吸引