Jinwu Financial News | According to the Sino-Thai International Development Research Report, Guangzhou recently announced that it will hold a hearing on the water price adjustment plan for central urban areas on May 9. According to the two plans, water prices for first-tier to third-tier residential users were raised by 24.2% to 31.3%, 24.2% to 31.3%, and 86.4% to 97.0%, respectively. As for major cities in the mainland, tap water prices were raised in parts of Shanghai at the beginning of the year. Among them, water prices for residents in Pudong increased by 17.2% to 62.6%. Although China Water (00855) has no projects in Guangzhou or Shanghai, it can still benefit from the general trend of water prices mentioned above.
Furthermore, at the beginning of the month, the National Development and Reform Commission and six other ministries and commissions (including the Ministry of Water Resources) issued a new law “Measures for the Administration of Infrastructure and Utility Franchises”. The bank believes that the new law provides policy support to local governments and can promote the operation of more tap water projects to private enterprises in the long term and optimize public finance expenditure. Based on the principle that users pay out of pocket, the pricing of incoming water will be more marketable in the future, providing more room for water price increases. According to the bank's information, local governments or state-owned enterprises are still responsible for about 80% of tap water operations in the mainland, indicating that private enterprises still have a lot of room for development.
The bank maintains profit forecasts and will not make adjustments until the project price adjustments are implemented. As the company's financial year has reached FY25, the bank rolled over to 5.8 times the FY25 target price-earnings ratio and technically raised the target price from HK$7.00 to HK$7.10, corresponding to a 51.0% increase. Maintain a “buy” rating.