Chuangsheng Securities predicts that the net profit attributable to the parent company of China Water (00855) FY2024-FY2026 will be 1.94 billion, 2.12 billion, and 2,289 billion, respectively.
The Zhitong Finance App learned that Chuangsheng Securities released a research report stating that the initial “buy” rating of China Water (00855) predicts that FY2024-FY2026's net profit attributable to the parent company will be 1.94 billion, $2.12 billion, and 2,289 billion, respectively. The corresponding EPS is HK$1.19, 1.30, and HK$1.40, respectively, with a target price of HK$7.5. With the water supply business as the core, the company has begun to develop the piped direct drinking water business in recent years. This business is growing rapidly and is expected to become the company's second growth curve. Furthermore, FY20's dividends to date have been HK$0.3 per share, HK$0.31 per share, HK$0.34 per share, HK$0.34 per share, and HK$0.13 per share for FY24H1, respectively. The company promises a future dividend payment rate of not less than 30%.
The bank believes that the company successfully adjusted prices for 4, 8, and 1 project in FY22, FY23, and FY24H1, respectively. The corresponding production capacity was 580,000 tons/day, 500,000 tons/day, and 23,000 tons/day, respectively, accounting for 9.1%, 7.8% and 0.4% of the combined tap water production capacity. With the end of the epidemic, the industry has begun to enter the price adjustment cycle. The price adjustment process generally takes 1 year. Currently, the company has 10 projects entering the price adjustment process, 5 of which have entered the post-price adjustment cycle (the company currently has 60 tap water supply projects). It is expected that in FY24H2 and FY25, more projects will be approved to raise water prices. The gross margin of urban water supply is expected to be gradually restored in the next 3 years.
In addition, the company took the lead in laying out the piped direct drinking water business in 2015, and promoted the piped direct drinking water business through government and customer resource advantages, technical advantages, and brand advantages. The compound revenue growth rate of Pipeline Direct Drinking Water FY19-23 reached 405%. As of September 30, 2023, the share of pipeline direct drinking water revenue in the company's revenue has increased to 15%, and it is expected to grow into a business equivalent to the urban water supply business in the next 5 years.