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王彥囡小姐(Wang Yannan)
分析師

畢業於中國科學技術大學,獲管理學碩士學位,求學期間主修財會和經濟學。現為輝立證券持牌分析師,主要負責環保公用及新能源的研究,專注於從宏觀政策、行業及基本面角度挖掘投資價值。

Graduated from the University of Science and Technology of China with a Master`s degree in Management and major in Financial accounting and Economics throughout her academic study.Currently Covering Environmental Protection and New Energy sectors as an analyst in Phillip Securities and focus on the macro policy,industry and fundamentals to explore the investment value.


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Beijing Enterprises Water Group Limited (BEWG) (371.HK) - PPP+ industry fund facilitates the transformation of light assets

Thursday, July 13, 2017 Views1677
Beijing Enterprises Water Group Limited (BEWG)(371)
Recommendation on  13 July 2017
Recommendation Buy
Price on Recommendation Date $6.070
Target Price $7.680

Leading water treatment scale in China: Beijing Enterprises Water Group affiliates to the state-owned enterprise Beijing Enterprises Group Company Limited. The Company's main business included water treatment services (sewage treatment + water supply), water environment governance and construction (comprehensive governance + BOT water services) and technical services. As at the end of 2016, the Company had 452 water plants, covering 25 provinces/autonomous regions/ municipalities directly under the Central Government in China and parts of overseas regions. Its total design capacity reaches 27,168,000 tons/day and the water handling capacity reaches 16.48 million tons/day. The scale ranks the top in China stably.

Continuous rapid growth in performance: The performance of 2016 was impressive. The revenue increased by 29% yoy and stood at HKD17,355 million, with the main benefits from the substantial increase in revenue from comprehensive governance projects, water supply services and BOT water service projects. Profits attributable to shareholders rose 31% yoy to HKD3,227 million, and diluted earnings per share grew by 31.9% yoy to HKD36.27 cents, indicating a dividend payout of 37%. In terms of profitability, gross margin continued to decline, and decreased by 3.5 percentage points to 33.33%, of which the adjustment of value-added tax policy and an increase in the proportion of the lower gross margin construction revenue are main reasons; net profit margin remained relatively stable, increased slightly by 0.4 percentage points to 18.6%. Thanks to a variety of bonds issued, the Company's cash holdings at the end of the term increased by 71.55% yoy and stood at HKD10,921 million.

Increased performance contribution rate of construction service: In the Company's business structure, the revenue of water treatment services accounts for approximately 30%, profit accounts for approximately 50%, and the rest comes from the water environment governance and construction services. Specifically, the revenue of water treatment services is RMB5,025 million, increased by 14.3% yoy; net profit stands at RMB2,275 million, increased by 12.3% yoy with steady growth. With the gradual improvement of the performance contribution rate of construction service, especially comprehensive governance projects, there were 13 comprehensive governance projects under construction in 2015, and the number grew to 20 in 2016, which led to the construction revenue increased by 35.7% overall to HKD11,308 million; net profit increased by 47.2% yoy to HKD1,291 million, and the performance contribution rate grew to 43%, which became an important source of profit growth for the Company.

PPP+ industry fund beneficial to transformation of light assets: The Company strengthened the acquisition efforts of projects for the continuous growth in its processing capacity. In 2016, the Company added water treatment design capacity of 4.55 million tons/day, of which approximately 2/3 of the projects came from PPP projects; net increase in design capacity was 3.756 million tons/day. According to the Company's order receiving schedule, it is expected that the newly added capacity will remain at over 3 million tons in 2017. The Company has signed a USD30 billion PPP project order in the first quarter of 2017, exceeding the full year's target. It is expected to add RMB100 billion of PPP projects in 2017. With new projects implemented one after another, the future performance will be supported constantly. In addition, the Company's first PPP project industry fund - Chifeng water environment comprehensive governance project was formally established and the total scale was RMB1 billion. Beijing Tongzhou project also plans to adopt the fund model. The innovation of financing channels such as PPP industry funds can help the Company improve its cash flow, reduce the debt burden, and speed up the acquisition and implementation of PPP projects.

Valuation and Rating

The Company will maintain rapid development with the benefit from the release of PPP performance and the promotion of industry concentration. Furthermore, the widespread use of the light asset model of the PPP+ industry fund is expected to be a catalyst for boosting the Company's share price. We estimate that, from 2017 to 2018, the revenues of the Company will reach RMB24,545 million and RMB31,909 million, respectively; the net profits RMB 4,165 mbillion and RMB 5,264 million, respectively; EPS RMB 0.48 and RMB 0.60, respectively. We give a target price of HKD7.68 and the rating "Buy". (Closing price as at 11 July2017)

Risk Warnings

Market competition has increase;

The acquisition and implementation of projects are below expectations;

The implementation of industry fund is below expectations.

Financials

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本文所包含的意見、預測及其他資料均為本公司從相信為準確的來源搜集。但本公司對任何因信賴或參考有關內容所導致的損失, 概不負責。輝立証券(香港)有限公司(或其任何附屬公司)、其董事、高級人員、分析員或僱員可能持有所述公司的股票、認股證、期權或第三者所發行與所述公司有關的衍生金融工具等。此外,本公司及所述人士均隨時可能替向報告內容所述及的公司提供投資、顧問或其他服務,或買賣(不論是否以委託人身份)及擁有報告中所述及公司的證券。本電子報並不存有招攬任何證券買賣的企圖。
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