Beijing Enterprises Water Group: Hold Rating Amidst Transition to Asset-Light Model and Financial Stabilization

In a report released today, Patricia Yeung from DBS maintained a Hold rating on Beijing Enterprises Water Group (BJWTF – Research Report), with a price target of HK$2.20.

Patricia Yeung has given her Hold rating due to a combination of factors impacting Beijing Enterprises Water Group. Despite a significant drop in construction revenue leading to an 18% decline in earnings for the first half of FY24, the company has maintained its dividend per share, indicating a focus on cash flow improvement. The company is transitioning to an asset-light business model to reduce capital expenditure and improve its financial standing, which is expected to stabilize earnings growth in 2024.
However, the company’s balance sheet remains weak due to high debt levels, although there are signs of improvement with positive operating cash flow and stable capex requirements. The market anticipates flat earnings growth in FY24, with a potential increase in FY25. The current valuation reflects its financial improvements and market position, justifying the Hold rating with a target price of HK$2.20, which aligns with its historical average price-to-earnings ratio.

According to TipRanks, Yeung is an analyst with an average return of -3.6% and a 55.81% success rate. Yeung covers the Utilities sector, focusing on stocks such as Huaneng Power International, ENN Energy Holdings, and China Resources Gas Group.