The Zhitong Finance App learned that Dongwu Securities released an updated report on China Water (00855) results. Dongwu Securities pointed out that excluding the exchange rate affecting steady growth in performance, China's direct drinking water business performed well and maintained a “buy” rating.

Specifically, in fiscal year 2023, the profit of China's Direct Drinking Water Business Division increased by 206%, and revenue from water supply and drainage collaboration to help environmental protection increased 18% over the same period last year. Among them, pipeline direct drinking water achieved revenue of HK$1,310 million, up 88.9% year on year, and division profit of HK$504 million, up 206.0% year on year.

At the same time, the company's direct drinking water revenue share increased to 9.2%, accelerating its rise under the dual main business strategy. Excluding the impact of fluctuations in the RMB exchange rate, the company's direct drinking water business revenue increased 100.5% year-on-year, and the profit margin of piped direct drinking water was 38.3%, an increase of 14.8 pct over the previous year.

In addition, the company's water supply and operation scale and water volume have been growing steadily, and water price adjustments have slowed down due to the impact of the epidemic. Among them, the company sold 1.53 billion tons of water, an increase of 4.1% over the previous year. As of March 31, 2023, the company's total tap water, raw water and sewage operation scale was 10.3 million tons/day, 2.32 million tons/day under construction, and 4.38 million tons/day to be built. (Under construction+proposed construction) accounted for 65% of the operation, guaranteeing room for future growth.

Dongwu Securities adjusted its net profit forecast for the 2024-2025 fiscal year of HK$22.90/HK$2,694 billion to HK$21.83/2,497 billion. The estimated net profit for FY2026 was HK$2,827 billion. Corresponding PE was 4.4/3.8/3.4x, respectively, maintaining the “buy” rating.