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Public company info - China Water Industry Group Ltd. , 01129.HK
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China Water Industry Group Ltd., 01129.HK - Company Profile
Chairman Zhu Yongjun
Share Issued (share) 1,597,000,000
Par Currency Hong Kong Dollar
Par Value 0.5
Industry Water Supply
Corporate Profile Business Summary: The Group is principally engaged in (i) provision of water supply, sewage treatment and construction services; (ii) exploitation and sale of renewable energy in the PRC; and (iii) property investment and development. Performance for the year: The Group’s total revenue generated from operations increased by 17.98% from HK$1,008.01 million for the FY2018 to HK$1,189.20 million for FY2019. Profit attributable to owners of the Company for the FY2019 was HK$115.62 million (FY2018: HK$6.65 million), a substantial increase of HK$108.97 million primarily due to more profit generated from renewable energy projects and gain on disposal of associates. Basic profit per share from operations for the FY2019 was at HK7.24 cents when compared with basic profit per share of HK0.42 cents recorded for the FY2018. Business Review: During the year under review, the Group is engaged in three business segments: (i) provision of water supply, sewage treatment and construction services; (ii) exploitation and sale of renewable energy; and (iii) property investment and development. For the FY2019, the Group recorded a steady growth in its city water supply operation and construction and environment protection segments. For the year under review, the revenue and the segment net profit of the Group amounted to HK$1,189.20 million and HK$267.23 million respectively, representing an increase of 17.98% and 45.12% over the corresponding period of 2018. 1.1 Water supply business There are three city water supply projects of the Group after the completion of disposal of 35% equity interest of Jinan Hongquan and 30% equity interest of Super Sino (the “Disposals”). These projects are well spread in Jiangxi and Shandong provinces. PRC (FY2018: five water supply projects). The daily aggregate water supply capacity was approximately 0.39 million tonne (FY 2018: 1.99 million tonne). Following the Disposals, the number of water supply projects and daily aggregate water supply capacity will be further reduced to three and 390,000 tonne respectively. Total water supply to the Jiangxi and Shandong during the year recorded 89.45 million tonne (FY 2018: 80.59 million tonne), increasing by 10.99% over 2018. For the FY2019, the revenue and gross profit from water supply business amounted to HK$174.16 million and HK$64.60 million respectively, representing 14.65% and 12.99% of the Group’s total revenue and total gross profit respectively. Compared with the FY 2018, the revenue and gross profit increased by HK$11.56 million and HK$3.10 million, the improvement was due to the increase in water tariff in Yichun Water and the increase in volume of water sold. The average rates for the water supply ranged from HK$1.75 to HK$2.51 per tonne (2018: from HK$1.78 to HK$2.57 per tonne). 1.2 Sewage treatment business There are three sewage treatment projects of the Group located in Jiangxi, Guangdong and Shandong provinces (FY 2018: three sewage treatment projects). The daily aggregate sewage disposal capacity was approximately 190,000 tonne (FY 2018: 170,000 tonne) generating a revenue of HK$49.73 million and gross profit of HK$14.60 million respectively, representing 4.18% and 2.94% of Group’s total revenue and total gross profit respectively. The increase in disposal capacity was the completion of second phase of sewage treatment plant in Yichun Fangke. Compared with the FY2018, the revenue and gross profit slightly increased by HK$1.96 million and HK$0.08 million respectively. During the year under review, the Group processed in aggregate of 58.52 million tonne of waste water (FY 2018: 57.49 million tonne), increasing by 1.79% over 2018. Upon the completion of Mingyue Mountain Project and Jinxiang Project, the number of sewage treatment plants will increase to five projects and the daily aggregate sewage disposal capacity will increase by 50,000 tonne to 240,000 tonne. The construction of Mingyue Mountain Project and Jinxiang Project are expected to be completed in June 2020 and in April 2020 respectively. The average rates for sewage treatment ranged from HK$0.68 to HK$1.27 per tonne (FY2018: from HK$0.67 to HK$1.33 per tonne). 1.3 Construction services for water supply and sewage treatment infrastructure Construction services included water meter installation, infrastructure construction and pipeline construction and repair. These were the Group’s second major sources of revenue and gross profit contributing HK$456.99 million and HK$180.44 million respectively, representing 38.43% and 36.29% of the Group’s total revenue and total gross profit respectively. Compared with the FY2018, the revenue and gross profit increased by HK$150.51 million and HK$40.42 million respectively. The increase in revenue and gross profit was due to the infrastructure construction work for sewage treatment projects and increase of construction activities during the year. 1.4 Exploitation and sale of renewable energy business Up to the date of this report, the Group has 39 solid waste treatment projects, of which 32 have commenced operation with a total installed capacity of 137.3 MW, the remaining 7 are under construction, with an estimated total installed capacity of 16.5 MW. During the year, the Group secured 5 new projects in Nanning, Hainan Sanya, Lingao, Gaizhou and Lianyuan, with an estimated total installed capacity is 16.5 MW. For the FY2019, the revenue and gross profit recorded HK$502.92 million and HK$236.62 million respectively. Compared with the FY2018, the revenue and gross profit substantial increased by HK$69.60 million and HK$55.93 million respectively. Included in revenue was HK$143.18 million (2018: HK$115.90 million) and HK$298.93 million (2018: HK$234.09 million) derived from the government tariff subsidies and the sale of electricity to local grid companies respectively, representing 28.47% and 59.44% of the total renewable energy revenue respectively. During the year under review, the Group had 29 projects in operation (2018: 25 projects), generating approximately 708,075.2MWh of on-grid electricity which represented an increase of 24.32% over 2018(2018: 569,536.8MWh). As at 31 December 2019, the Group accumulated a total installed capacity of 150.8 MW, representing an increase of 11.70% compared to FY2018 (FY2018: 135 MW). The average electricity rate was HK$0.58 per kilowatt-hour and the average CNG rate was HK$1.91 per m3 (FY2018: average electricity rate HK$0.60 per kilowatt-hour and the average CNG rate was HK$1.86 per m3). 1.5 Property Investment and development For the FY2019, property development recorded the revenue and gross profit of HK$5.40 million and HK$0.89 million respectively (FY2018: the revenue and gross profit of HK$57.84 million and HK$7.43 million) which was the sale of properties in Yu Jing No. 1 Project* (御景壹號). During the year, there were only 4 residential units and 1 retail shop being sold (FY2018: 180 residential units and 1 retail shop being sold). In recent years, the Board has been exploring appropriate diversification business opportunities and/or investments to expand the revenue sources and enhance the long-term growth potential of the Group. In 2013, the Group had acquired its first land as a trial run project in Yingtan city, Jiangxi Province, the PRC for the property development of Yu Jing No. 1 Project. With a view to broadening the revenue base and improving the profitability of the Group, in 2018, the Group has changed its investment strategy by acquiring two pieces of lands in cities including Nanjing and Huizhou for the development of Nanjing Space Big Data Industry Base and Honghu Blue Valley Wisdom Square project respectively. The premises of these projects are research and development centers and office buildings, of which part of the development will be leased out to other tenants as investment properties or sold as property development depending on the then property market condition of the related respective cities. In replenishing land reserves, the Group had acquired a property project company named Jiangxi Deyin. All these projects are still under construction or yet to develop. During the year, the Group has continued to acquire premium land reserves by acquiring three pieces of lands in Shangrao City, Jiangxi Province, the PRC for the development of Sanshui Guobinfu Project, Sanshui California Sunshine Real Estate Project and Sanshui Jinlin House project. The Group has launched two projects to the market for pre-sale and gained a good response from the market. This is the new starting point of the Group to step into the property industry. With the optimistic view of the property development market in Mainland China together with the Group’s past experience in real estate projects, the Board has determined to classify the property investment and development business as one of the Group’s principal business activities in this reporting period. For the future development, the Group will be prudently to acquire premium lands to replenish the Group’s land bank. Prospects: During Spring Festival in 2020, novel coronavirus pneumonia (COVID-19) epidemic spread rapidly across the Greater China area. The central government and the local government waged an epidemic prevention battle racing against time. The Ministry of Ecology and Environment successively published relevant policy documents in respond to this epidemic. The epidemic imposed a greater challenge on the international situation which was rather unpromising to begin with, and caused impact on the PRC. Enterprises in the environmental protection industry also encountered new challenges. To proactively response to the requirements of national and local government policies, the Group thoroughly implemented the epidemic prevention mechanism and adhered to the principle of ensuring the safety and health of all employees to the maximum extend by adjusting the timeline of work resumption, making early preparation work for production resumption, reasonably arranging employees to take leaves or work from home, and endeavoring to safeguard the stable development of three major business segments, namely water service, new eco-energy and city-industry integration, in order to minimize the impact of the epidemic on the Group’s business and thereby ensure normal operation. The Group believe that opportunities lie within the crisis. As long as the Group persist in the Group’s fundamental conception with unwavering determination, the Group can eventually triumph in this battle. To continue the Group’s development, the following future plans will continue to be implemented: 1. Expanding along the upstream and downstream of industrial chain and moving towards the new era of the water supply industry The water supply segment, as a public utility, is a policy-oriented industry. Currently, the development of water supply industry tends to be saturated, and the management system of water resources is strict. The industry has entered into a stage of stable development. Driven by the acceleration of urbanization, the total volume of sewage discharge has been increasing every year, and the sewage treatment industry has entered into a stage of rapid growth. In the face of challenges, the traditional operation model of water supply proactively expands along the upstream and downstream of industrial chain. The realization of strategic corporate transformation is the only way to move towards the new era of the water supply industry. 1. To strongly support the companies in the water supply segment to develop industries other than their principal activities, and to strengthen the construction of the reconstruction works of water supply pipeline network and related ancillary works for water supply and water connection projects; 2. To continue the implementation of smart water service, to apply a series of smart water supply facilities such as smart water meter, smart manhole cover, smart fire hydrant, smart pump room, etc., and to realize district metering of water supply and implementation of online business. In reliance on the “One Picture (一張圖)” dispatching system which was launched online, to actualize the establishment of the education base for smart water supply service jointly by Yingtan Water Supply and Sanchuan Wisdom (三川智慧); 3. In recent years, under the State’s “One belt, One road” initiative and the establishment of various cooperation mechanisms on the national level, the Group also identify the immense market potentials in the water supply industry. While keeping its foothold of existing smart water service technologies and maintaining international perspective, the Group will deeply explore the market demand for water treatment in the various countries along the route and keep making innovations. To strive for its slice of “cake” in the trend of international production capacity cooperation, the Group utilized its extensive experience in management and implementation of overseas projects in order to develop in a win-win situation 2. Consolidating existing business resources and steadily promoting overseas environmental protection business In recent years, the overall direction of the relevant policies launched in the solid waste industry revolves around the “three actions” principle, namely, reduction of volume, recycling of resources and harmless treatment, which specify the direction of the acceleration of marketization. Currently, the volume of solid waste generation remains high, and there is still a relatively large gap for the treatment of general industrial solid wastes, hazardous wastes and municipal household wastes, and thus the future of the solid waste industry will remain prosperous. 1. Consolidating and developing the existing domestic business resources and steadily promoting overseas environmental protection business; 2. Keeping its foothold in environmental protection and explore other businesses in the environmental protection industry in order to expand its scope of business; 3. Broadening the financing channels while introducing new strategic investments. 3. Sustaining city-industry integration development and exploring the value of urban spaces In the present, the city-industry integration model, which takes the city as the carrier and industry as the safeguarding basis, has gained growing concern. City-industry integration does not only drive the value enhancement of urban spaces but also provides new ideas for coordination development of industry, city and residents. 1. To expedite the main construction of the Huizhou Honghu Blue Valley Wisdom Square* (惠州鴻鵠藍 谷智慧廣場) project, expand customers in the market through the conception of the sales of single buildings or the whole complex; speed up subsequent business promotion and sales works of the Nanjing Space Big Data Industry Park (南京空間大數據產業園) project; 2. By gathering its institutional advantages, Zhongkuang Construction Group (中曠建設集團) devotes great effort to develop markets in Guangdong-Hong Kong-Macau Greater Bay Area. It plans to undertake at least 2 influential engineering projects in Nanchang and Northeast Jiangxi area in order to achieve breakthrough progress; build a team of outstanding contractors, project managers and quality suppliers and formulate preferential policies for joining the team in order to attract more construction talents to join the Company; continue to strengthen the development of self-employed model to carry out the project co-investment model for the core management personnel of the Company in order to renew and expand the ways of self-employment and achieve flexibility and diversity; 3. To complete the construction of Yugan Sanshui Guobinfu Project and Sanshui California Sunshine Project, to actualize the refund delivery of all properties and shops; to facilitate the smooth progress of the construction of Sanshui (三水金麟府) Project. Based on the successful examples of real estate projects in Yugan, to foster the development and investments of real estate projects in surrounding counties and towns in order to stimulate the vitality of urban industries, enhance city function and improve living environment. 4. Looking forward to 2020, the nationwide suspension of work and production due to the COVID-19 outbreak has inevitably caused delays to some extent in the Group’s launch of new properties and its commencement and completion plans. In view of tremendous risks inside and outside China, increased external uncertainties and destabilising factors, there was downward pressure on the property market. However, with the support of reasonable monetary easing and proactive fiscal policies by the Chinese government, it is believed that the great resilience in China’s economy will enable China to step out of the trough caused by the COVID-19. Pursuant to the government policy, the Group has adjusted its project launch strategy, shifting away from centralized sales launch model. At the same time, the Group has made proactive preparations for adversity in light of the current conditions by organizing multiple forms of online marketing, including live streaming, proprietary sales platform wechat mini program, mobile app, and major third-party platforms to facilitate its consumers’ housing transaction. When the impact of the COVID-19 is gradually eliminated according to the current good trend, it is expected that the property market should stabilize in 2020. 4. Actively explore more financing channels for further expansion Group’s core businesses To ensure the sustainable development of the Group and fulfil the capital demands during the development, the Group took the initiative to expand its financing channels and enhanced its funding capability including but not limited to issue of new bonds, issue of new shares, loans financing with various domestic and international commercial banks so as to make well preparation for the future development of the Group’s projects. The Group managed to maintain a healthy financial condition with a reasonable gearing ratio. The Group will always be committed to achieving its business philosophy of “gaining government confidence, citizen satisfaction, shareholders’ recognition and staff contentment”. In 2020, there is no doubt a challenging year but with the Group’s solid financial position and diversified income streams, the Group is full of confidence to overcome difficulties and steadily develop its three major businesses in water supply, new eco-energy and cityindustry integration. Meanwhile, it will proactively develop other businesses in the upstream and downstream of water supply and environmental protection industries as well as overseas businesses in order to optimize its strength and expand its scale and to break new ground for China Water Industry Group. The Board will continue to adopt a prudent approach in implementing the Group’s stated strategies for the benefit of the Group and its shareholders.

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