Soochow Securities released a research report affirming its "Buy" rating for GUANGDONG INV (00270), highlighting the stability of its water resources segment and improved debt metrics following the divestment of its property arm. The firm raised its 2025–2027 net profit forecasts from HK$4.27/4.36/4.45 billion to HK$4.54/4.65/4.74 billion, reflecting better-than-expected cost reductions. At a projected 65% dividend payout ratio for 2025, the implied dividend yield stands at 6.3%, with a PE ratio of 10.3x/10.0x/9.9x for the respective years.
Key financials for 2025 Q1–Q3: - Continuing operations revenue: HK$14.28 billion (+1.3% YoY) - Attributable profit: HK$4.07 billion (+13.2% YoY), driven by a 52.9% decline in finance costs to HK$263 million and administrative expense savings.
**Water Resources Segment Highlights**: 1. **Dongshen Water Supply Project**: - Revenue: HK$5.24 billion (+1.6% YoY), including HK$4.30 billion (+2.6%) from Hong Kong supplies. - Pretax profit: HK$3.60 billion (+3.9%), with total supply volume up 1.5% to 1.67 billion tons. Pricing flexibility for Hong Kong-bound water bolstered profitability.
2. **Other Water Projects**: - Revenue: HK$5.61 billion (+5.8% YoY), though pretax profit dipped 2.6% to HK$1.60 billion. - Operational capacity as of September 2025: - Water supply: 1.08 million tons/day (+0.9%) - Wastewater treatment: 229,790 tons/day (+12.09%)
**Property Segment Performance**: - **Investment Properties**: - Guangdong Tianhe Plaza contributed HK$1.26 billion (+4.8%) in revenue and HK$767 million (+11.3%) in pretax profit. - **Department Stores**: - Five stores generated HK$317 million (-45.6%) in revenue but saw pretax profit jump 37.3% to HK$64 million. - **Hotels**: Revenue surged 57.8% to HK$505 million, though pretax profit fell 20.3% to HK$69 million. - **Highways/Bridges**: Guangdong Expressway posted HK$446 million (-7.0%) in revenue and HK$231 million (-8.2%) in pretax profit. - **Energy**: Guangdong Energy’s pretax profit rose 17.1% to HK$143 million despite a 3.5% revenue drop.
**Risks**: Potential shortfalls in water supply volume, slower-than-expected tariff adjustments, and receivables collection challenges.