Company Overview - Beijing Enterprises Water Group was established in 2008, focusing on wastewater and reclaimed water treatment, water supply services, water environment governance construction, technical and consulting services, equipment sales, and urban resource services [1] - The company is transitioning to a light asset operation model, with engineering business continuously shrinking, leading to a projected gross profit margin of 6.4% by 2024 [1] - As of the end of 2024, Beijing Holdings will hold 41.1% of the company's shares, with the actual controller being the Beijing State-owned Assets Supervision and Administration Commission [1] Financial Highlights - Capital expenditure is expected to decrease to 4.11 billion HKD in 2024, a year-on-year reduction of 2.89 billion HKD, while maintaining stable dividends with a dividend per share of no less than 0.157 HKD since 2021, resulting in a projected dividend yield of 6.22% for 2024 [1] - The company has experienced profit fluctuations over the past three years due to the sale of joint ventures and impairment provisions, but the increase in operational proportion is expected to enhance future earnings stability [3] Industry Analysis - The water supply and wastewater treatment sectors are projected to have a compound annual growth rate (CAGR) of 0.37% and 1.2% from 2025 to 2027, respectively [2] - The competitive landscape shows a trend of regional monopolies coexisting with national leaders, with the company holding a market share of 1.8% in water supply and 8.2% in wastewater treatment as of 2023 [2] - The company has reduced its uninvested capacity since 2022, with operational capacity expected to reach 33.84 million tons per day by the end of 2024, resulting in a capacity elasticity of 29.2% [2] Pricing and Revenue - Since November 2023, some cities have increased the basic water price for residential use by an average of 0.36 HKD per ton, reflecting a 21.3% increase, which may benefit the company's relatively stable water pricing [2] - The company's revenue from water environment governance construction services is projected to decrease, with the share of profit from comprehensive governance projects and BOT water projects expected to drop to 7.8% and 4.6%, respectively, by 2024 [2] Profit Forecast - The company is expected to achieve a net profit attributable to shareholders of 1.66 billion HKD, 1.70 billion HKD, and 1.71 billion HKD for the years 2025 to 2027, with a projected dividend growth of 3% from 2024 [3] - The anticipated dividend yields for 2025, 2026, and 2027 are 6.4%, 6.6%, and 6.8%, respectively, supporting a "buy" rating for the stock [3]

Investment Rating - The report assigns a "Buy" rating to the company [11]. Core Viewpoints - Beikong Water Group is a national leader in water services with stable dividend guarantees. The company is expected to achieve steady growth in its water supply and sewage treatment business as capacity utilization increases. The pressure on growth in the water environment management construction service has gradually been released. The company has turned positive in free cash flow since 2022, and the dividend per share has not been less than HKD 0.157 since 2021, indicating a strong dividend capability [4][11]. Summary by Sections Company Overview - Beikong Water Group, established in 2008, operates in sewage and reclaimed water treatment, water supply services, water environment management construction, technical and consulting services, equipment sales, and urban resource services. The company is actively expanding its light asset operation model, with engineering business continuously shrinking, leading to a decrease in gross profit contribution [7][19]. Shareholding Structure - As of the end of 2024, Beijing Enterprises holds 41.1% of the company's shares, with the actual controller being the Beijing State-owned Assets Supervision and Administration Commission. Other significant shareholders include China Three Gorges Corporation and its subsidiaries [7][35]. Highlights - The company has passed the peak of project construction, with capital expenditure expected to decrease to HKD 41.1 billion in 2024, down by HKD 28.9 billion year-on-year. The dividend per share is projected to yield a dividend rate of 6.22% in 2024 [7][40]. Water Services Sector - The demand for water supply and sewage treatment is expected to grow steadily, with a projected CAGR of 0.37% and 1.2% from 2025 to 2027. The company’s market share in water supply and sewage treatment is 1.8% and 8.2%, respectively, as of 2023. The company’s operational capacity is expected to reach 33.84 million tons per day by the end of 2024 [8][11]. Financial Analysis - The company has experienced profit fluctuations over the past three years due to factors such as the sale of joint ventures and impairment provisions. However, the increase in operational proportion is expected to enhance future earnings stability. As of the end of 2024, the cautious estimate of accounts receivable is HKD 20.85 billion, with 75.8% of service concession receivables due within one year [10][11]. Profit Forecast - The company is expected to achieve a net profit attributable to shareholders of HKD 16.6 billion, HKD 17.0 billion, and HKD 17.1 billion from 2025 to 2027, with dividends projected to grow by 3% annually from 2024 levels [11].