Net earnings in 2021 increased 4.1% YoY to HK$4,697 mn. Revenue and net earnings in 2021 went up 28.2% and 4.1% to HK$29,715 mn and HK$4,697 mn, respectively. The revenue during the period met our expectation, but earnings missed. The dramatic rise in SG&A expenses during the period (which went up 46.6% YoY to HK$3,666 mn) was the key reason behind earnings growth slowdown. Water resources sales surged 37.1% YoY to HK$17.81 bn, contributing more than half of total revenue in 2021. DPS in 2021 reached HK$0.6071 (+3.0% YoY), the highest in the Company’s history and equivalent to a payout ratio of 84.5%, higher than the Company’s 5-year historical (from 2016 to 2020) payout average of 69.7%.
We updated our earnings estimates based on new assumptions. Amid the expected investment slowdown in the property industry in China, we expect GDI to refocus on the development of its water business during the 14th Five-Year Plan period. Total revenue from water resources is set to increase YoY by 25.2%/ 18.6%/ 16.5% from 2022 to 2024, respectively. Water resources sales accounted for 59.9% of GDI’s total revenue in 2021 and is projected to further climb to 66.6%/ 70.4%/ 73.5% from 2022 to 2024, respectively. We expect total revenue of GDI to grow YoY by 12.7%/ 12.1%/ 11.6% from 2022 to 2024, respectively. Our revised EPS estimates from 2022-2024 are HK$0.869/ HK$0.951/ HK$1.062, respectively.
We reiterate the investment rating of "Accumulate" but adjust our TP to HK$13.00. We remain optimistic about the outlook of GDI and expect a dividend payout of no less than 80% per year. The new TP corresponds to 15.0x/ 13.7x/ 12.2x 2022-2024 PER or 1.8x/ 1.7x/ 1.6x 2022-2024 PBR.