Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 2.74 [7]. Core Views - The company reported a revenue of RMB 24.27 billion for 2024, a decrease of 1.0% year-on-year, primarily due to a decline in contributions from BOT water projects. The net profit attributable to shareholders was RMB 1.678 billion, down 11.5% year-on-year, which was below expectations due to increased impairment losses. The dividend per share (DPS) for 2024 is set at HKD 0.161, a 2.5% increase from 2023, resulting in a dividend yield of 6.9% based on the closing price on March 27, 2025 [1][4]. Revenue and Profitability - The wastewater and reclaimed water treatment service revenue increased by 6% to RMB 9.18 billion, driven by new water volume from plants that commenced operations during the year. However, the water governance construction service revenue fell by 36% to RMB 3.44 billion, with BOT plant construction revenue down 42% to RMB 2.62 billion, reflecting the company's strategy to reduce investments in line with its asset-light transformation [2][3]. Cash Flow and Dividend Policy - The company has maintained positive free cash flow for three consecutive years. The capital expenditure for 2024 is expected to decrease by 41% to RMB 4.11 billion, with further reductions anticipated. The implementation of user-pay trends and potential increases in water prices are expected to contribute positively to performance. The payout ratio for dividends is projected to reach 94% in 2024, indicating strong potential for future dividend increases as free cash flow improves [3][4]. Earnings Forecast - The report revises down the earnings forecast for the company, projecting net profits attributable to shareholders of RMB 1.543 billion, RMB 1.643 billion, and RMB 1.724 billion for 2025, 2026, and 2027 respectively. The expected earnings per share (EPS) for 2025 is RMB 0.15, with a target price based on a 16.5x PE ratio for 2025 [4][6].
北控水务集团：减值拖累净利，分红超预期-20250328