Beijing Enterprises Water’s （00371 HK, "BEWG", or the "Company"） 2021 revenue increased 9.9% YoY to HK$27.9 billion. Shareholders’ net profit increased 0.3% YoY to HK$4.2 billion. Results in line with expectation. Gross margin decreased 0.9 ppts YoY to 37.5%. Administrative expense ratio was up 1.3 ppts YoY to 11.3%. Finance costs ratio was down 0.3 ppts YoY to 9.8%. During 2021, net increase in daily design capacity was 2,761,226 tons. As at 31 December 2021, total daily designed capacity was at 44,885,962 tons.
　　We expect sewage and reclaimed water treatment services revenue to grow at a CAGR of 15.6% in 2021-2024, and water distribution services revenue to grow at a CAGR of 9.8% in 2021-2024. We expect construction services revenue to grow at a CAGR of -4.6% in 2021-2024. We expect technical services and machinery sales revenue to grow at a CAGR of 21.6% in 2021-2024. Overall revenue should grow at a CAGR of 7.8% in 2021-2024.
　　Our EPS estimates are HK$0.438, HK$0.491 and HK$0.566 for 2022/ 2023/ 2024, respectively. Despite that the Company’s business growth slowed down, its improving earnings quality and cash flow deserves a significant revaluation. We lower the TP to HK$3.70, representing 10.1x/ 9.6x/ 8.9x 2022/ 2023/ 2024 EV/EBITDA. Maintain "Buy".