China Water Affairs Group (855)

Business description

China Water Affairs Group owns and operates regulated water supply assets across 50 cities in mainland China, serving 10 million customers in the residential, commercial and industrial sectors.

Y/E Mar Revenue (HK$m) EBITDA (HK$m) PBT (HK$m) EPS (c) P/E (x) P/CF (x)
2016A 4740.0 1951.0 1505.0 40.1 19.8 N/A
2017A 5708.0 2647.0 1963.0 55.4 14.3 N/A
2018E 7069.0 2968.0 2279.0 64.9 12.2 N/A
2019E 8075.0 3404.0 2641.0 72.1 11.0 N/A

Last updated on 21/03/2018

Investment summary

Interim figures from CWA, released before Christmas, and the recent announcements of a framework agreement in Shishou and the acquisition of the water supply companies in Wuzhu County and Xiayi, indicate continued growth at CWA. The results showed revenue increasing by 16.3%, while basic EPS rose by 22.9%. Driving overall growth was the rise in revenue (+10.4%) and segmental profits (+22.8%) at the key water supply business. A turnaround in the performance of the associate line and tight control of costs, also helped boost profitability. Following the results, we increased our valuation to HK$8/share. At HK$8/share, CWA trades on a P/E of 12.3x. We believe such a rating is sustainable for a company that we expect to grow EPS by c 14% CAGR in 2017-20e.

Last updated on 06/04/2018

Industry outlook

Water supply in China remains fragmented. The central government encourages local governments to deleverage their own balance sheets with private–public partnerships. This trend remains positive for CWA.

Last updated on 06/04/2018

Key management

Duan Chuan Liang, Chairman
Ding Bin, Executive director
Liu Yu Jie, Executive director
Li Zhong, Executive director

Company address

Suite 6408, 64/F, Central Plaza
18 Harbour Road
Wanchai
Hong Kong
+852 3968 6666
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