squidfish| Chuangsheng Securities: The first "buy" rating target price of HK$7.5 to China Water

According to a research report released by Chuangyi Securities, the first "buy" rating of China Water (00855), it is estimated that the net profit of FY2024-FY2026 belonging to the parent company is 19.SquidfishThe corresponding EPS is HK $1.19,1.30 and HK $1.40 respectively, with a target price of HK $7.50. Taking the water supply business as the core, the company has begun to develop pipeline direct drinking water business in recent years, which is growing rapidly and is expected to become a company.SquidfishThe second curve of growth. In addition, FY20 has so far paid dividends of HK $0.30 per share, HK $0.31 per share, HK $0.34 per share, HK $0.34 per share and HK $0.13 per share of FY24H1, respectively, with a commitment to pay no less than 30 per cent of future dividends.

The bank believes that the company has successfully adjusted prices for 4, 8 and 1 projects in FY22, FY23 and FY24H1, respectively, with a corresponding capacity of 580000 tons / day, 500000 tons / day and 23000 tons / day, accounting for 9.1% of tap water production capacity 7.8% and 0.4%. With the end of the epidemic, the industry began to enter the price adjustment cycle, and the price adjustment process usually takes one year. At present, a total of 10 projects in the company have entered the price adjustment link, of which 5 projects have entered the price adjustment cycle (the company currently has 60 tap water supply projects). It is expected that more projects in FY24H2 and FY25 will be approved to raise water prices. In the next three years, the gross profit margin of urban water supply is expected to be gradually repaired.

In addition, the company took the lead in laying out the pipeline direct drinking water business in 2015, promoting the pipeline direct drinking water business through the advantages of government and customer resources, technology and brand. The revenue of pipeline direct drinking water FY19-23 has reached a compound growth rate of 405%. As of September 30, 2023, the proportion of pipeline direct drinking water revenue in the company's income has increased to 15%, and it is expected that it will grow into a business equivalent to urban water supply business in the next five years.

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