BEWG's （00371 HK） 2020 revenue decreased 10.0% YoY HKS25.4 bHHon. Shareholders' net profit decreased 15.1% YoY to HK$4.2 billion. EPS decreased 16.5% YoY to HK$0.416. Results were worse than expected, mainly due to higher-than-expected assets impairment loss which drove other operating expenses up by 99.6% YoY to HK$1.2 billion. During the period, operating services revenue increased steadily, in which sewage and reclamation water treatment services revenue increased 217% YoY to HK$6.3 billion and water distribution services revenue increased 4.0% YoY to HK$2.7 billion. Construction services revenue decreased 26.5% YoY to HKS13.1 billion, in which revenue from construction of comprehensive renovation projects decreased 41.7% YoY to HK$4.3 billion and revenue from construction of BOT projects decreased 15.7% YoY to HK$8.8 billion, mainly due to the COVID-19 pandemic during 1H2C20 which delayed progress of some projects, and the Company reduced signing new water environmental renovation projects. Technical consultancy services revenue increased by 26.4% YoY to HK$3.3 billion, driven by strong market demand. Overall gross margin increased 2.3 ppts YoY to 38.4%, mainly due to increase in revenue contribution from higher gross margin operation services business. Administrative expense ratio increased 1.1 ppts YoY to 10,0% and finance cost ratio increased 1.5 ppts YoY to 10,1%. In addition, contribution from joint ventures increased by 32.3% YoY to HK$0.73 billion, mainly due to increase in share of profit from joint ventures which engaged in water treatment services and construction services for water environmental renovation; associated companies contribution decreased 14,1% YoY to HK$0.33 billion, mainly due to a decrease in shared profit from BECE （01250 HK）， During the period, net daily design capacity increased by 2,735,854 tons, up 67% compared with the net capacity increase in 2019. As at 31st December 2020, total designed capacity was at 42,124,736 tons/day.
　　2020 results were below expectation mainly due to substantial assets impairment loss, however, operating services revenue actually still posted steady growth, and the Company's fundamentals did not materially turn worse. With construction revenue increasing, 2021 results should significantly recover. We will review the
　　Company's profit forecasts and target price in the next report. Considering that the compan/s valuation is still attractive, we should maintain the “Buy" rating.