20231024-中泰国际证券-中国水务-00855.HK-业务将逐步改善_6页_1mb

报告摘要

China Water (855HK) Analysis Summary

Company Overview

China Water (855HK) reported strong revenue growth in FY23, with a 96% year-on-year increase to 14.2 billion HKD, though this was partially offset by exchange rate volatility. The company faces short-term pressure from rising interest rates and RMB depreciation, affecting its profitability.

Financial Highlights

Revenue: FY23 saw growth of 96% to 14.2 billion HKD; adjusted growth is 164% after currency impact.
Debt Management: Borrowings shifted to higher-yield RMB loans (+261% YoY), reducing interest costs; expected positive impact on profits from 2HFY24.
Profitability: Interest expenses surged 361% YoY in FY23 but are projected to decline in future years. Currency effects may distort 1HFY24 earnings.

Growth Drivers

Economic recovery in China, evidenced by rising retail sales and electricity generation, is expected to increase water demand, driving revenue growth from 0.2% YoY in FY23 to 8.4% in FY24.
Water price increases are anticipated to resume, supporting income.
The pipe drinking water business is expanding rapidly: revenue increased 92% YoY, now accounting for 92% of total income, with China as the largest market by share.

Strategic Developments

The company plans to delist its water business and list the pipe water division in 2HFY24, potentially unlocking value.
Financial forecasts factored in these elements, with revised revenue and net profit outlooks for FY24-26.

Investment Recommendation

Maintain "Buy" rating with a reduced target price of 760 HKD, yielding up to 551% upside. Downward adjustments reflect interest rate and currency risks.