China Water Affairs Group (0855) AI Stock Analysis

• Market Cap: $10.27B
• Dividend Yield: 8.27%
• Average Volume (3M): 2.11M
• Price to Earnings (P/E): 9.6
• Beta (1Y): 0.73
• Revenue Growth: -16.07%
• EPS Growth: -14.55%
• Country: HK
• Employees: 11,400
• Sector: Utilities
• Sector Strength: 68
• Industry: Regulated Water
• EPS (TTM): 0.20
• Shares Outstanding: 1,632,322,400
• 10 Day Avg. Volume: 2,251,853
• 30 Day Avg. Volume: 2,112,812
• PEG Ratio: -2.20
• Price to Book (P/B): 0.81
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -11.03
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $5.34
• Price Target Upside: -11.33% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1

• Rating: 76 Outperform
• Price Target: ―

China Water Affairs Group shows strong technical momentum and appears undervalued, offering an attractive proposition for investors. However, challenges in revenue growth, cash flow generation, and high leverage temper the outlook. The stock’s solid operational efficiency and healthy dividend yield further enhance its attractiveness, but the financial constraints need addressing for sustained performance.

Positive Factors

Operational Efficiency

Newly developed direct drinking water operation is less capital intensive than its traditional water business, offering potential cost savings.

Partnerships

CWA is a preferred partner when acquiring new water projects from municipal governments, enhancing growth opportunities.

Revenue Stream

Steady, regulated revenue stream from water supply contributes to reliable financial performance.

Negative Factors

Debt Levels

High net debt-equity ratio poses a significant risk to financial stability.

Valuation

CWA trades at approximately 4x FY25F P/E, significantly below its 7-year average, indicating potential market concerns.

China Water Affairs Group Business Overview & Revenue Model

Company Description

China Water Affairs Group Limited, an investment holding company, engages in the water supply, environmental protection, and property businesses in the People's Republic of China. It operates through City Water Supply Operation and Construction, Environmental Protection, and Property Development and Investment segments. The City Water Supply Operation and Construction segment is involved in the provision of water supply operation and construction services. The Environmental Protection segment engages in the sewage treatment and drainage operation and construction, solid waste and hazardous waste, environmental sanitation, and water environment management businesses. The Property Development and Investment segment develops, sells, and invests in properties. It is also involved in the development and infrastructure of sightseeing area; provision of water environmental renovation infrastructure; constructs and operates drinking water; and investment, construction, and operation of water conservation and hydropower related projects, as well as energy conservation and environmental protection and hotel operations. The company was formerly known as China Silver Dragon Group Limited and changed its name to China Water Affairs Group Limited in December 2004. China Water Affairs Group Limited is headquartered in Wan Chai, Hong Kong.

How the Company Makes Money

China Water Affairs Group makes money primarily through its water supply services, which involve the provision of treated water to residential, commercial, and industrial customers. The company generates revenue by charging these customers for water usage based on metered consumption. Additionally, it earns income from sewage treatment services, where it treats and processes wastewater before it is released back into the environment, typically charging local governments or municipal bodies for these services. The company also engages in infrastructure construction projects related to water conservancy and management, earning fees for its expertise in designing and building these systems. Strategic partnerships with local governments and other entities enhance its operational capabilities and market reach, contributing to its revenue streams.

China Water Affairs Group Financial Statement Overview

Summary

China Water Affairs Group displays operational efficiency with solid margins but faces challenges in revenue growth and cash flow generation. High leverage is a potential risk, and declining ROE indicates decreased profitability from equity. While profitability remains, the decline in free cash flow and overall cash management requires attention to ensure long-term financial health.

Income Statement

The company exhibits a consistent gross profit margin, with a recent figure of approximately 37.2%. However, there is a decline in revenue from 2023 to 2024, indicating a revenue growth rate of -9.4%, which is a concern. The net profit margin stands at around 11.9%, showing profitability but a decrease from the previous year. EBIT and EBITDA margins are healthy at 31.5% and 39.7%, respectively, indicating good operational efficiency.

Balance Sheet

The debt-to-equity ratio is approximately 1.97, suggesting a high level of leverage that could pose a risk if not managed properly. Return on equity (ROE) has declined to around 12.0%, reflecting reduced efficiency in generating profits from shareholders' equity. The equity ratio is 20.2%, showing a moderate reliance on equity to finance assets.

Cash Flow

The free cash flow is negative, and free cash flow growth is highly negative, indicating challenges in generating cash after capital expenditures. The operating cash flow to net income ratio is 1.81, showing adequate cash generation relative to net income, but the free cash flow to net income ratio is negative, denoting issues with cash retention.

Breakdown	TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Income Statement
Total Revenue	11.97B	12.86B	14.19B	12.95B	10.35B	8.69B
Gross Profit	4.54B	4.78B	5.35B	4.96B	4.34B	3.76B
EBITDA	4.90B	5.11B	5.13B	4.67B	4.07B	3.46B
Net Income	1.46B	1.53B	1.86B	1.89B	1.69B	1.64B
Balance Sheet
Total Assets	66.32B	63.24B	61.16B	57.06B	47.04B	41.90B
Cash, Cash Equivalents and Short-Term Investments	5.15B	5.30B	8.15B	7.68B	5.45B	6.90B
Total Debt	27.23B	25.22B	24.16B	22.39B	19.14B	17.89B
Total Liabilities	43.75B	41.79B	39.79B	36.36B	30.13B	27.60B
Stockholders Equity	13.51B	12.79B	12.99B	12.97B	10.23B	8.51B
Cash Flow
Free Cash Flow	1.93B	-2.36B	-948.69M	-166.82M	-1.02B	447.85M
Operating Cash Flow	2.34B	2.78B	3.68B	3.88B	2.84B	3.56B
Investing Cash Flow	-4.38B	-5.43B	-4.16B	-4.48B	-4.75B	-3.66B
Financing Cash Flow	1.29B	605.35M	1.73B	2.61B	-392.29M	2.11B

China Water Affairs Group Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 6.02
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:0855, the sentiment is Neutral. The current price of 6.02 is below the 20-day moving average (MA) of 6.25, below the 50-day MA of 6.07, and above the 200-day MA of 5.26, indicating a neutral trend. The MACD of 0.03 indicates Positive momentum. The RSI at 44.32 is Neutral, neither overbought nor oversold. The STOCH value of 30.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HK:0855.

China Water Affairs Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
0855	76 Outperform	$10.27B	9.55	8.28%	8.27%	-16.07%	-14.55%
Sector *	65 Neutral	¥332.56B	7.76	9.28%	2.81%	2.43%	8.54%
BJWTF		$3.02B	14.32	5.86%	7.55%	―	―
GGDVF		$5.46B	13.60	9.81%	2.25%	―	―
27K		€77.44M	2.87	2.85%	―	―	―
2281		HK$576.01M	3.00	6.20%	8.21%	―	―
3768	61 Neutral	HK$627.76M	2.20	5.17%	―	-13.42%	-18.54%

China Water Affairs Group Corporate Events

China Water Affairs Group Issues Supplemental Announcement to 2024 Annual Report

China Water Affairs Group Limited has issued a supplemental announcement to its 2024 Annual Report, providing additional details on its share option scheme and related party transactions. The company has maintained the number of options available for grant under its share option scheme, and it has complied with the necessary listing rules regarding its connected transactions, ensuring transparency and adherence to regulatory standards.

China Water Affairs Group Announces Board Composition

China Water Affairs Group Limited has announced the composition of its board of directors, detailing the roles and functions of its executive, non-executive, and independent non-executive directors. This announcement reflects the company’s commitment to governance and transparency, potentially impacting its operational efficiency and stakeholder confidence.

China Water Affairs Announces Equity Investment Agreement with Taikang Asset

China Water Affairs Group, through its subsidiaries, is involved in the water supply industry, focusing on water resources management and infrastructure development. The company announced an equity investment agreement with Taikang Asset, where Taikang will invest RMB1.5 billion in the Target Company, a subsidiary of China Water Affairs. This investment will result in a slight dilution of China Water Affairs’ equity interest in the Target Company, constituting a discloseable transaction under Hong Kong’s listing rules. The agreement includes a shareholders’ agreement outlining the management and operational rights and obligations, potentially impacting the company’s market positioning.

China Water Affairs Group Appoints New Non-Executive Director

China Water Affairs Group Limited has appointed Mr. Bai Li as a non-executive director, effective from March 21, 2025. Mr. Bai, who holds significant experience in financial and governmental roles, is expected to bring valuable insights to the company. His appointment, which does not have a fixed term, aligns with the company’s strategic focus on strengthening its governance and leveraging his expertise to enhance its market position.