What happened: Beijing Enterprises Water （"BEWG", or the "Company"） posted its 2021 audited results.
　　BEWG’s （00371 HK） 2021 revenue increased 9.9% YoY HK$27.9 billion. Shareholders’ net profit increased 0.3% YoY to HK$4.2 billion. EPS decreased 0.4% YoY to HK$0.414. Results were in line with expectation. During the period, operating services revenue increased steadily, in which sewage and reclamation water treatment services revenue increased 30.2% YoY to HK$8.1 billion and water distribution services revenue increased 13.5% YoY to HK$3.1 billion. Construction services revenue decreased 4.1% YoY to HK$12.6 billion, in which revenue from construction of comprehensive renovation projects decreased 28.8% YoY to HK$3.1 billion, mainly due to that the Company reduced signings of new water environmental renovation projects, and revenue from construction of BOT projects increased 7.9% YoY to HK$9.5 billion. Technical consultancy services revenue increased by 24.8% YoY to HK$4.1 billion, driven by strong market demand. Overall gross margin decreased 0.9 ppts YoY to 37.5%, mainly due to YoY decrease in gross margin of construction services and technical consultancy services businesses. Administrative expense ratio increased 1.3 ppts YoY to 11.3%, mainly due to the increase in staff-related expenses as result of business expansion and increase in research and development expenses during the period. Finance cost ratio decreased 0.7 ppts YoY to 15.6%. In addition, contribution from joint ventures increased by 18.1% YoY to HK$0.86 billion, mainly due to increase in share of profits of the joint ventures which engaged in construction services for comprehensive renovation projects; associated companies contribution decreased 81.5% YoY to HK$58 million, mainly due to share of loss from BECE （01250 HK）。 In 2021, net daily design capacity increased by 2,761,226 tons, up 0.9% compared with the net capacity increase in 2020. As at 31st December 2021, total designed capacity was at 44,885,962 tons/day.
　　The Company’s asset-light strategy should gradually improve its operating cash flow, and help to lower its debt ratio and raise dividends in the long term. The Company’s valuation has room for further upside. We will review the Company’s profit forecasts and target price in the next report. Considering that the Company's valuation is still attractive, we will likely maintain the "Buy" rating.