北控水务 (0371.HK) 2025年中期业绩发布会
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会议摘要
The mid-term performance of Beijing Capital Water Group in 2025 shows that despite a decrease of 8% in main business revenue and 20% in net profit attributable to the parent company, operating cash flow and free cash flow have significantly improved, increasing by 16.9 billion yuan and 17.1 billion yuan respectively. Both the revenue and net profit of the water treatment service sector have increased, with a 9% growth in overseas project revenue. The Group continues to improve free cash flow through optimizing the main business structure, reducing costs, and disposing of inefficient assets. It is expected that overall revenue will decrease by 5% in 2025, with a net profit attributable to the parent company of around 15 billion yuan and a net inflow of free cash flow of approximately 20 billion yuan. The Group holds an optimistic view on the new PPP documents released by the Ministry of Finance, believing that it will help improve cash flow and balance sheet. The Group is actively promoting the adjustment of water supply project prices and expects to promote and complete the price adjustment comprehensively within the next two to three years.
会议速览
Beijing Enterprises Water Group's 2025 Mid-term Performance Presentation: Significant Improvement in Financial Indicators and Operating Cash Flow.At the performance presentation, the management of Beijing Enterprises Water Group detailed the financial performance for the mid-term of 2025, including significant improvements in main business revenue, net profit, and operating cash flow. Despite a decrease in main business revenue and net profit compared to the same period last year, operating cash flow and free cash flow have both significantly increased, demonstrating the company's strong financial health. Additionally, in the first half of 2025, dividends paid to shareholders increased by 5% compared to the same period in 2024 as a way to give back to investors.
2024 mid-year financial report: Revenue from water treatment services increased, while revenue from construction services sector decreased.In mid-2024, water treatment service revenue increased by 2% year-on-year, net profit attributable to shareholders increased by 2%, mainly due to adjustments in sewage prices and improved operating efficiency in China. Revenue in the construction service sector decreased by 36% year-on-year, while revenue in the technology service and equipment sales sector also decreased by 36%, but gross profit margin improved. Revenue in the urban resource service sector increased by 13%, but gross profit margin decreased by 1%.
Analysis of capital expenditures, cost expenses, and asset liabilities in the first half of 2025, as well as interpretation of water project operations.In the first half of 2025, the Group's capital expenditure was about 940 million yuan, a decrease of 40% compared to the previous year, mainly due to project contraction and settlement node impacts. Operating expenses decreased by 8%, financial expenses decreased by 24%, and the comprehensive financing cost decreased to 3.16%. The cash on hand is about 8.6 billion yuan, with a net debt ratio of 119%. The water projects added contracted water volume of 120,000 tons/day and exited 560,000 tons/day, with contracted and operating water volumes of approximately 43.3 million tons/day and 33.79 million tons/day respectively, with stable water price adjustments. There were no new water environment comprehensive management projects, with 17 operating projects and 9 under construction.
Beijing Enterprises Water Group's 2025 Sustainable Development Strategy and Financial OutlookBeijing Enterprises Water Group released its 2024 sustainable development report, focusing on environmental protection and social value under the WISE framework, continuously optimizing cash flow management, improving operational efficiency and talent structure. It predicts a slight decrease in revenue in 2025, with a net profit of approximately 1.5 billion yuan attributable to shareholders, capital expenditure controlled within 5 billion yuan, net inflow of free cash flow of approximately 2 billion yuan, and a net debt ratio controlled within 140%, committed to high-quality, sustainable development.
Interpretation of the new PPP policy and improvement strategy for Beijing Enterprises Water Group's accounts receivable.The conversation revolves around the newly released PPP document by the Ministry of Finance, providing a detailed interpretation of the positive impact of the document on the recovery of accounts receivable by Beijing Enterprises Water Group. This includes measures such as repayment through special bonds, reducing bad debt risks, strengthening asset exit channels, etc., which have improved the company's cash flow and quality of its balance sheet.
Outlook on the price adjustment of the water supply project in 2025 and the internal promotion strategy within the group.The discussion focused on the water supply project's average water price in the first half of 2025, which remains consistent with last year. It was pointed out that the nationwide price adjustment progress is slower than expected, and the reasons for this slow progress were analyzed, including the complexity of the adjustment process and the cautious attitude of local governments. Northern Water Group attaches great importance to the price adjustment work, establishing a special working group and carrying out training. It is expected that the price adjustment in 2025 will be between 20% to 30%, with a focus on promoting the adjustment of a capacity of 1.2 million tons. It is expected that the price adjustment work will be completed comprehensively within the next two to three years.
Beijing Enterprises Water Group's dividend policy outlook: Improvement in cash flow drives increase in fixed dividends.After years of fixed dividend payments, Beijing Enterprises Water Group raised its dividend by 3% at the end of last year and again by 5% in the first half of this year. As the company enters a mature stage, it is expected that capital expenditures will decrease and improvements in asset disposal and collection will increase cash flow. The group forecasts an annual increase of approximately 1 billion yuan in free cash flow, and in the future, dividends will increase based on a certain percentage on top of the fixed dividends, with the specific amount to be determined by the board of directors, demonstrating a continued commitment to sharing value with investors.
The process of anonymous questioning through the phone during investor meetings.During the meeting, the host directed the investors on the phone who were not identified to ask questions, confirmed their Hong Kong phone numbers, and granted them the permission to ask questions, emphasizing the process and precautions of anonymous questioning.
The analyst inquired about the growth rate of dividends and the situation of asset impairment.The analyst inquired about the growth of dividends in the first half of the year, and the management team stated that the annual dividend growth rate may be between 3% and 5%, with the specifics to be decided by the board of directors. In addition, regarding asset disposal, the management team revealed plans to dispose of 3 billion RMB worth of non-performing and inefficient assets this year. Four projects have already been completed in the first half of the year, involving a total investment of 1 billion RMB and recovering 290 million RMB in funds. It is expected that there will be an impairment of 600-800 million RMB for the full year, with manageable risks.
Cost control and future prospects in water supply and wastewater treatment business.The dialogue delves into the reasons for the decline in gross profit margin in the water supply business, including the increasing proportion of residential water consumption and decreasing proportion of industrial water usage, as well as the strategies the group has implemented to address this through refined management and innovative measures. At the same time, the gross profit margin of the sewage treatment business continues to improve, thanks to measures such as intelligent transformation, regional intensive management, and centralized procurement. In the future, the group plans to achieve sustainable growth in the water supply and sewage treatment business through means such as economic recovery, expansion of water volume, improving production efficiency, and cost control.
Execution of debt policy and sharing of achievements of Beijing Water Affairs Administration.Discussed the project progress of Beijing Water Affairs under the debt policy, including 183 projects being included in the national platform with a total amount of 8.66 billion yuan, as well as receiving over 500 million yuan in funds in the first half of the year, which increased to over 8 billion yuan by the end of August, showing tangible results.
Translation: Company's Decrease in Financial Expenses Strategy and Expected ResultsDiscussed the decrease in the company's financial expenses in the first half of the year, pointing out that it has decreased by 24%, and the financing cost has dropped to 3.16%. It is expected to further decrease to below 3% in 2025. The estimated full-year financial expenses are expected to decrease by 5.5 to 6 billion, with at least 1.8 to 2.3 billion in the second half of the year.
Explanation of the performance collection rate, cash flow, and impairment situation in the first half of 2025.In the first half of 2025, the water utility collection rate is close to 90%, and the water environment collection rate has increased by more than 10% year-on-year, leading to an overall improvement in the collection rate. The net cash flow from operating activities was 1.75 billion, an increase of 1.71 billion compared to the first half of 2024, and it is expected to reach 2 billion for the full year. Impairment losses in the first half of the year amounted to 440 million, with 260 million of that related to water utility commitment impairments, including provisions for general credit risks of 110 million and high-risk project provisions of 150 million. Management estimates impairment losses for the full year to be between 6-8 billion, but with the support of government policies, there is great potential for future growth in cash flow and profits.
Analysis of Highlights and Risk Provision Strategy of Beijing Enterprises Water Group's Performance in the First Half of the Year.Discussed four major highlights in the improvement of Beijing Enterprises Water Group's free cash flow, optimization of main business structure, reduction of costs and expenses, and disposal of inefficient assets in the first half of the year. Emphasized the consideration of the repayment part in risk provisions, as well as the future planning of the group to enhance operational efficiency through intelligent transformation.
The performance release conference of Beikong Water Group has successfully ended, thank you for the attention and support from investors.At the end of the press conference, the last investor tried to ask a question through the phone but successfully communicated through WeChat. The host expressed thanks for the support of all participants and provided ways to contact the Beijing Enterprises Water Group investor relations team, including email addresses, looking forward to meeting again in the future.
要点回答
Q：In the mid-2025, how much is the main business income and net profit attributable to the parent company of Beijing Enterprises Water Group, and what changes have occurred compared to 2024? What is the dividend situation and year-on-year growth rate of Beijing Enterprises Water Group in the first half of 2025?
A：As of June 30, 2025, the total revenue of the group's main business is approximately 10.46 billion yuan, a decrease of 8% year-on-year compared to the first half of 2024. The net profit attributable to the parent company is around 900 million yuan, a decrease of about 20% from the first half of 2024. The dividend per share for the first half of 2025 is 7.35 Hong Kong dollars, an increase of 5% compared to the first half of 2024.
Q：As of June 30, 2025, what is the asset-liability situation of Beijing Enterprises Water Group?
A：As of June 30, 2025, the book cash and cash equivalents were approximately 8.6 billion, with a net debt ratio of 119%, which remained roughly the same as the end of 2024.
Q：How is the operating cash flow and free cash flow of Beijing Enterprises Water Group in the first half of 2025?
A：This period's estimated net operating cash flow is approximately 19.4 billion yuan, an increase of 16.9 billion yuan from the mid-2024 period. The estimated net inflow of free cash flow is approximately 17.5 billion yuan, an increase of 11.17 billion yuan from the mid-2024 period.
Q：What changes are there in the revenue and net profit attributable to the parent of the water treatment service sector in the mid-term of 2025 compared to the same period last year?
A：The revenue of the water treatment service sector in this period is approximately 5.97 billion yuan, accounting for about 57%, an increase of 2% compared to the same period last year. The net profit attributable to the parent company is about 2.64 billion yuan, accounting for about 90%, also an increase of 2% compared to the same period last year.
Q：What is the situation with the revenue and gross profit margin of the construction services sector in the mid-2025 compared to the same period in 2024?
A：The construction service sector's revenue for this period is approximately 250 million, accounting for 3% of the total revenue, a decrease of 36% compared to the same period last year. The gross profit margin is 17%, which is basically the same as in 2024.
Q：How does the revenue and gross profit margin of the technology service and equipment sector change in the mid-2025 compared to 2024? How does the revenue and gross profit margin of the urban resource service sector grow in the mid-2025 compared to 2024?
A：In this period, the revenue from technical services and equipment sales segment is approximately 7.4 billion, accounting for 7% of total revenue, a decrease of 36% compared to the mid-year of 2024. The gross profit margin is between 30% and 40%, rising by about four percentage points compared to the mid-year of 2024. The revenue from urban resource services segment is approximately 33.04 billion in this period, accounting for 29% of total revenue, a 13% increase compared to the mid-year of 2024. The gross profit margin for this period is 20%, a decrease of one percentage point from the same period last year.
Q：On improving operational efficiency, what plans does the group have? In terms of talent development mechanism, how will the group optimize and upgrade it?
A：The group plans to upgrade its operations through regional intensification and operational efficiency, actively promoting the landing and implementation of the cloud chain end model, and building core competitiveness for future operations services and light asset business. At the same time, a systematic upgrade of the system mechanism will be carried out to improve management efficiency. The group will upgrade the talent development mechanism, establish a value creation and sharing mechanism to stimulate organizational vitality, continuously promote frontline employees to obtain certification and improve skills, and achieve optimization and upgrading of talent structure.
Q：What is the financial data forecast for the year 2025?
A：It is expected that the overall revenue of the group will decrease by about 5% in 2025 compared to 2024, with the water management operation sector maintaining a slight growth and the construction sector decreasing by about 50%. The revenue of the technology consulting and equipment sales sector is expected to decrease by about 10%, while the urban resource services sector is expected to increase by about 8%.
Q：What is the estimated full-year net profit attributable to the parent company in 2025 for the Group? How are the forecasts for capital expenditure and net debt ratio?
A：In 2025, the full-year net profit attributable to the parent company is expected to be around 15 billion. Excluding the impact of inefficient asset disposal, the full-year performance is expected to be basically flat compared to 2024. Capital expenditure is forecasted to not exceed 5 billion yuan, and the net debt ratio is expected to be controlled within 140%.
Q：What is the group's expectations regarding free cash flow?
A：It is estimated that the net inflow of free cash flow will be around 2 billion in 2025, and with capital expenditures decreasing each year, the net inflow of free cash flow for the Group is expected to increase to around 1 billion per year.
Q：Regarding the newly released PPP file, what impact does it have on the company's water resources accounts receivable?
A：According to the interpretation of the Guidelines for Standardizing the Construction and Operation of Government and Social Capital Cooperation Stock Projects issued by the General Office of the State Council, this document is very favorable for the collection of the company's accounts receivable. It is expected that historical operating fees can be solved through special bonds, reducing the risk of bad debts, improving the certainty of water fee and government subsidy repayment, while also allowing special funds to repay the construction costs already paid by social capital, ensuring the smooth progress of projects under construction, and providing a new channel for the company's asset liquidation and exit.
Q：What is the current pricing situation and future prospect of the company's water supply project?
A：The company is paying attention to the water price adjustment work, but the adjustment process is complex and requires going through multiple stages and processes, usually taking 1-2 years, ultimately controlled by local government. The current progress of price adjustment is slower than expected, and the team is diligently analyzing the reasons. Regarding future increases in tap water prices, the company will continue to track and forecast based on market and policy changes.
Q：What has been the situation of pricing adjustments in small and medium-sized cities nationwide from 2024 until now? What is the government's attitude towards pricing adjustments?
A：Since 2024, a total of 22 large, medium, and small cities nationwide have completed price adjustments, but by 2025, only three cities, namely Nanjing, Guangzhou, and Shenzhen, successfully implemented price adjustments. This indicates that the government is cautious about price adjustments, and the overall pace is slower than expected.
Q：How important is Beihu Water Affairs' price adjustment work?
A：The Beihu Water Administration attaches great importance to price adjustment work, setting up a special working group for water price adjustments in the water supply company, and carrying out management training. Focusing on key links, setting up special reward measures, and promoting price adjustment work in an all-round and orderly manner.
Q：What are the price adjustment expectations for 2025?
A：It is estimated that the adjustment range in 2025 is likely to be between 20% and 30% among cities that have completed adjustments since January 24. The 1.2 million tons of production capacity project currently being undertaken by the group has achieved cost savings, and government approval work is progressing. It is expected that the cities of Hezhou, Kaili, and Anping may complete the adjustment in the second half of the year. In addition, there is another 1.1 million tons of production capacity in preparation for adjustment, and it is expected to promote and complete the adjustment of water prices comprehensively in the next two to three years.
Q：How does the company foresee the increase in dividends in the future and how does it plan to share the company's value with investors?
A：As the company enters the mature harvest period, capital expenditures are decreasing year by year, coupled with improved asset disposal returns. It is forecasted that the group's free cash flow will increase by about 1 billion yuan annually. In the future, based on the improvement of free cash flow, a certain percentage of growth will be added to the fixed dividend payment, but the final dividend amount will be determined by the board of directors. It is a foreseeable trend to add a certain percentage increase on top of the current fixed dividend payment.
Q：Can we expect a 5% year-on-year increase in dividends for the second half of the year?
A：The company's management's preliminary direction is to increase growth on top of the fixed dividend, but the specific percentage increase is not guaranteed to be 3% or 5%. The final decision still requires the approval of the board of directors. Based on the current operating conditions, the dividend performance in the second half of the year may be better than in the first half.
Q：Could you give a detailed outlook on the cost implications for the water supply and wastewater treatment businesses?
A：This question was not clearly answered in the provided text.
Q：Is the full-year asset impairment expected to reach last year's level?
A：The group arranged a 3 billion yuan asset disposal plan for the whole year. In the first half of the year, four projects have been completed, involving a total investment scale of 1 billion yuan, with funds recovered estimated to be around 250-290 million yuan. Although asset disposal will bring one-time non-cash gains and losses, it is beneficial for improving cash flow and repairing the balance sheet. At the beginning of the year, it was estimated that impairments for the whole year would be around 600-800 million yuan. Currently, it is judged that this risk is controllable, and the impairment situation for the whole year is expected to be consistent with the initial estimate.
Q：In the first half of this year, the gross profit of water supply decreased by two percentage points year-on-year. Could you please provide a detailed explanation of the reasons for the decline and how the group has responded?
A：The reason for the decline in gross profit in the first half of the year is that although the proportion of residential business has increased, the proportion of industrial water with higher gross profit has slightly decreased, resulting in a decrease in gross profit margin. However, the revenue of the water supply sector remains stable, with an increase in water sales volume. The group is actively guiding water supply companies to engage in refined management through regional expansion, self-drilling well replacement, water meter replacement, and measurement standardization to drive a continuous increase in water volume. To address the issue of declining gross profit margin, the group is implementing a strategy of increasing revenue and reducing expenditure, improving water supply management efficiency through capital investments such as water volume expansion and pipeline reconstruction, and controlling costs through production efficiency improvement, labor cost control, and reduction of financial expenses. It is expected that the decline in gross profit margin is not a continuous trend.
Q：What innovative measures has the group taken in sewage operation to improve efficiency and reduce costs?
A：The group achieved comprehensive online management of Beihu Water Affairs through the self-developed SAD and SED data platforms, deploying intelligent control systems to achieve intelligent adjustment of various key process parameters. In addition, the group is exploring a new water plant management model transformation, shifting from a single plant management model to a regional intensive management model to achieve the sharing of high-value talents and resource scheduling. At the same time, Beifang Water Affairs is continuing to promote the construction of enterprise-level new water plant standards and AI-operation intelligent body. In the second half of this year, it plans to publicly release the AI-powered intelligent platform and intelligent body of Beikong Water Affairs.
Q：How is the current progress of the debt directory project at the company?
A：As of the end of June 2025, the company has a total of 183 projects included in the three major national debt platforms (Ministry of Finance, Ministry of Industry and Information Technology, Ministry of Housing and Urban-Rural Development), with a cumulative amount of 8.66 billion yuan. In the first half of the year, the cumulative amount received has exceeded 500 million yuan, and by the end of August, the amount received has exceeded 800 million yuan. The company will continue to follow up on policy developments and ensure full compliance with tax obligations.
Q：How much room is there for further decrease in finance costs?
A：In the first half of this year, the total financial expenses amounted to 11.9 billion, a year-on-year decrease of 24% to 3.16%, and it is estimated that the actual reduction in financial expenses for the whole year will be between 5.5 billion and 6 billion. The reduction in financial expenses is mainly achieved by optimizing debt structure and debt costs. It is expected that there will be at least a reduction of 1.8 billion to 2.3 billion in the second half of the year.
Q：How is the return rate of major performance achievements in the first half of the year?
A：In the first half of the year, the water business revenue collection rate was close to 90%, and the water environment business revenue collection rate increased by more than 10% year-on-year, with an overall improvement in the revenue collection situation. In addition, the net inflow of free cash flow was 1.75 billion, an increase of 1.71 billion from the first half of 2024, and it is expected that the full-year net inflow of free cash flow will reach 2 billion. At the same time, there was an impairment of 4.4 billion in the first half of the year, with urban resources impairment of 1.8 billion, and the impairment of the water business was 2.6 billion after excluding this impact.
Q：Is the expected impairment situation for the whole year consistent with the initial expectations? How does the management deal with expected credit impairment and collection management?
A：Yes, the expected impairment situation for the whole year should be kept at around 6 to 8 billion, which is in line with the initial expectations. Starting from 2024, the management gradually increases the specific proportion of expected credit impairment to objectively reflect the impact of local finances on repayment. At the same time, we have not given up on the management of project repayment, and have also added national policies to support repayment, expecting greater elasticity in future cash flow and profit growth.
Q：Does the impairment provision only apply to the disposal of inefficient assets, or does it also include repayments?
A：The repayment factor has been considered in the provision for risks.
Q：In the provision for credit risks of 260 million, how much are the general provision for credit risks and the provision for high-risk projects respectively?
A：The general credit risk provision is 1.1 billion, while the provision for high-risk projects is 1.5 billion.
Q：What are the significant achievements in the operation and management of Beijing Water Affairs in the first half of this year?
A：In the first half of the year, there were four main characteristics: 1) Continuous improvement in free cash flow, with revenue increasing by 17.1 billion yuan year-on-year; 2) Optimization of the main business structure, with steady growth in revenue and profit in the water treatment service sector; 3) Significant reduction in costs and expenses through quality and efficiency improvement, with a significant decrease in financial expenses and management expenses; 4) Accelerated disposal of inefficient assets, resulting in both asset quality and cash flow improvement, with four projects already disposed of, helping to improve cash flow and repair the balance sheet.
Q：What are the positive factors and prospects for the future development of Beijing Enterprises Water Group?
A：The company has entered a mature operating period. Despite facing great challenges, the company has optimized its cash flow performance through multiple measures, increased investment in scientific research to promote the construction of intelligent platforms and upgrade operating models. It is believed that these efforts will gradually yield results in the future, creating greater value for shareholders.
BJ ENT WATER
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