HONGCHENG WATERWORKS(SH:600461) Huachuang Securities·2024-04-11 16:00Investment Rating - The report maintains a "Recommended" rating for the company with a target price of 11.64 yuan [5][10][29]. Core Views - The company has shown steady revenue growth with a total revenue of 8.048 billion yuan in 2023, representing a year-on-year increase of 3.43%, while the net profit attributable to shareholders reached 1.082 billion yuan, up 12.59% year-on-year [10][32]. - The company is expected to benefit from upcoming water price adjustments, potentially adding 180 to 220 million yuan to revenues if the adjustments proceed smoothly [5][10]. - The integration of factory and network operations is anticipated to generate additional performance growth, with significant investments made in various projects [5][10]. - The company has a strong dividend policy, maintaining a high dividend payout ratio of 50.02% for 2023, with plans to continue distributing at least 50% of net profit in cash dividends over the next three years [5][10]. Financial Summary - Revenue by segment in 2023: - Wastewater treatment: 2.398 billion yuan (+4.56%) - Tap water: 966 million yuan (+3.37%) - Gas sales: 2.003 billion yuan (+5.25%) - Solid waste: 767 million yuan (+4.18%) - Engineering segment: - Water supply engineering: 661 million yuan (+20.23%) - Wastewater environmental engineering: 744 million yuan (-10.8%) - Gas engineering: 332 million yuan (-18.3%) [5][10]. - The company's comprehensive gross margin improved to 30.73%, with wastewater treatment at 44.67% and tap water at 41.54% [5][10]. - Forecasted net profits for 2024-2026 are 1.195 billion yuan, 1.355 billion yuan, and 1.483 billion yuan, respectively, with corresponding PE ratios of 10x, 9x, and 8x [5][10][28].