Beijing Enterprises Water Group Restricted (OTCPK:BJWTF) This autumn 2023 Earnings Convention Name March 26, 2024 5:00 AM ET
Firm Individuals
Convention Name Individuals
Unidentified Firm Consultant
Traders and analysts, good afternoon. On behalf of BEWG, welcome to our 2023 Assembly. And I’m IR Navis from BEWG. And we’re very grateful in your long-term care and help.
To start with, let me current the administration attending at this time’s assembly. They’re; Lehigh telephone of the BEWG, Monetary Director and Secretary, Woon Cheung Tung of BEWG; and the Rotating Chair and VP of BEWG. And earlier than we begin the presentation of our 2023 efficiency, please let me remind you that each, property, efficiency of the BEWG can be settled in RMB. So ranging from this, we might see that every one monetary efficiency shall be in RMB, in order that you should have a extra complete understanding of our efficiency. And now we are going to hand over to the Li Quoh [ph] to introduce our efficiency in 2023.
Unidentified Firm Consultant
Hello, all people. Now, on behalf of the BEWG, I wish to provide you with introduction to our 2023 efficiency. To start with, monetary statements by way of income as of December 31, 2023, the principle enterprise income amounted to RMB24.5 billion. All in RMB, and if there shall be Hong Kong Greenback, I’ll emphasize that; and it is up by 14% in contrast with RMB21.5 billion in 2022. And web revenue attributable to mother or father firm was RMB1.9 billion, 60% larger than RMB1.2 billion in 2022. Excluding nonetheless, and one-time non-cash influence, the web revenue attributable to mother or father firm elevated 20%.
And the money circulate efficiency has been constructive for 2 years and the operational money circulate estimated to be RMB2.3 billion, the very best the document lately. And the estimated web money circulate was round RMB1 billion. To repay all our shareholder help to the BEWG, we are going to preserve the annual dividend of 2022 [ph] to HK$0.157 [ph], specifically HK$0.087 [ph] within the second half of the yr, and sooner or later, this stage of annual dividend shall be remained. And secondly, let’s examine the revenues of various segments.
To start with, water therapy; this half occupy within the whole income round 47% web revenue attributable to mother or father firm; 72%, decreased the in contrast with 2022, primarily as a result of monetary consolidation with the BEUR. Excluding contribution of BEUR, the water therapy service income occupies 60%; 2 share factors larger than 2022. Internet revenue attributable to mother or father firm, 73%, the identical stage as 2022. After which, in Mainland China, the sewage and reclaimed water therapy service income and this section occupy round RMB8.2 billion, elevated by 2% in contrast with RMB8.1 billion in 2022 with a gross revenue margin of 55% due to larger electrical energy payments, and one-time influence, it’s 2 share factors decrease than 2022.
Excluding the one-time influence in two years, the year-on-year enhance of our income can be 7% with additionally the gross revenue margin remaining unchanged. And by way of water provide in Mainland China, the income was RMB2.5 billion, and it elevated by 12% in comparison with with RMB2.2 billion in 2022; primarily due to larger quantity of water provide. And the gross revenue margin 45%; 3 share decrease than 2022, primarily due to rising electrical energy prices.
And in abroad sewage and reclaimed water therapy service challenge; the income amounted to RMB900 million, the identical stage as 2022. And the general gross revenue margin in abroad challenge 24%, 2 share decrease than 2022; and that’s due to the rising electrical energy payments and chemical compounds value. And by way of building service; in 2023 the occupation of this a part of service decreased to 22%, 2 share factors decrease than 2022. And in addition the web revenue attributable to mother or father firm round 18%; identical stage as 2022. The OTA building service had a income of RMB4.5 billion, 14% larger than 2022 primarily due to all of the accelerated challenge building within the first half of 2023 contributing to a better manufacturing worth and the gross revenue margin 18%, identical stage as 2022.
By way of complete therapy and building service, the income registered at RMB800 millon, 33% decrease than RMB1.3 billion in 2022 as a result of all water setting complete renovation tasks have been suspended. And the remaining tasks are simply within the final interval and on the identical time, extra renovation tasks have step by step entered into the operation stage. And in addition the EPC and the water environmental operation service income with money circulate occupy upto 84%. And earlier than this segments sooner or later, it is going to stay roughly the identical stage.
And in addition in 2023, the gross revenue margin of water setting complete building and renovation was 26%; 10 share factors larger than 2022, primarily due to the modified income construction. EPC and operation service with larger revenue — gross revenue drives larger total gross revenue margin. By way of technical service and self [ph] equipment, the income was round RMB2.5 billion; 16% decrease than 2022 due to the decrease trade wants. And the gross revenue margin 43%; up by 3 share factors than 2022, primarily due to a better share of the skilled service with a better gross revenue margin.
And by way of different useful resource service; we speak about it right here — the BEUR income registered RMB1.5 billion accounting for 21% web revenue attributable to the mother or father firm; RMB120 million occupying 2% due to monetary consolidation and whether it is decreased to the entire yr, the income and web revenue attributable to mother or father firm elevated each, 19%. And by way of capital bills, in 2023 it was RMB6.8 billion, 8% larger than 2022 due to accelerated challenge building within the first half of the yr was additionally a better stage of building value. And by way of overheads with administration organizational change and improved operation and administration effectivity in 2023 the overheads in the entire yr registered RMB3.3 billion with our identical collaboration of 2022. So with BEUR, the entire yr overhead RMB3.2 billion, it mainly remained the identical stage.
By way of monetary bills was larger [ph]; up by 278 foundation factors averagely [ph]. The administration undertake well timed measures to regulate the lengthy forex construction and optimize the fundraising value setting. The monetary value of BEWG in 2023 was round RMB3.3 billion, and the great fundraising value was 4.29%. And — truly, it’s primarily due to the rising fundraising prices in abroad. And in aspect of China is round 2.6%, and by way of our asset and legal responsibility state of affairs, the money and money equal by the top of December 2023 it was RMB10.2 billion. And by way of the web debt ratio it was 118%; identical stage as the top of 2022.
Talking of our operation efficiency by way of water challenge in 2023; the newly contracted water quantity was 1.55 million ton per day and the EPOC mild asset challenge accounted for round 1.02 million ton per day. This has been low comparatively talking current years, and in 2023 will withdraw — the withdraw was 1.87 million ton per day. And for instructed operation challenge, 1.19 million ton per day expired, and the lively liquidation was upto 260,000 ton per day, and with additionally the governmental contract modifications with round 420,000 ton per day. And the full variety of signed sewage therapy crops was 750; reclaimed water crops, 69; water provide crops, 170; seawater desalination plant, one; and there have been 500 township and county sewage therapy services.
And by way of operation; we’ve working sewage therapy crops, 589; reclaimed water crops, 47; water Provide crops, 155; and the township sewage therapy facility, 398; and it is elevated by 1.19 million ton per day in contrast with the top of final yr. And by way of sewage therapy, operation dimension is upto 19.29 million ton per day and the place the Quasi4 [ph] class, 4.44 million ton per day occupying 23% [ph].
The Stage 1 challenge, 14.26 million ton per day occupying 74%, and with Grade 1B challenge, 440 — 540,000 ton per day occupying 2.8%. And by way of the water worth, the weighted common water worth was RMB1.49 per ton, and it elevated by 1.4% in contrast with 2022. And for water provide common worth, it was RMB2.15 per ton, elevated by 0.94% than 2022. And by way of tasks underneath building, in 2023 it was 4.06 million ton per day. And in 2024 they estimated new tasks to be constructed with 450,000 ton per day.
And by way of water setting renovation, by the top of December 2023 there have been three tasks on this facet or EPC OOM [ph] tasks, not funded by BEWG. And through 2023, we’ve altogether 12 tasks for water setting therapy underneath building; 11 of them had been mild asset challenge occupying the quantity of the full contract 0.8%, and one is heavy asset challenge. And we’ve altogether 14 tasks coming into into the operational interval already.
And talking of the third a part of my presentation, sustainable growth; as all stakeholders have been paying extra consideration to sustainability, BEWG positively reply to the nationwide technique and to stage up sustainability to the Group’s strategic focus. And over the previous yr we have made a variety of achievements in sustainability. In 2023 BEWG was chosen into SP Sustainable Improvement Annual E book, by first part, and we had been raised that to Grade A in MSCI ESG [ph], the one Asian firm within the water enterprise, and all these might exhibit that the sustainable achievements by BEWG have been acknowledged by the capital market.
And so we nonetheless observe the spirit of customer support of supply and innovation as a manner, and we’ve been expressing our attitudes in the direction of sustainability in addition to gathering opinion from all our stakeholders. And with evolving ESG setting, social and governance; we’ve been taking actions in a variety of low carbon tasks to cope with local weather change and discover new fashions of water enterprise. And the core efficiency shall be revealed in our 2023 Sustainable Improvement Report which shall be launched in April 2024.
And by way of a particular interpretation of BEWG’s efficiency, I wish to emphasize two factors. Over the previous 20 years of fast growth, water therapy in China has mainly entered into a really regular stage of growth. By way of sewage therapy, it is upto 97%, 98% or so — the variety of newly constructed sewage therapy crops is decreased quickly, as we have emphasised final yr. So it has transferred from an incremental market to a inventory market with a high quality enchancment because the core as an alternative of the amount increasement [ph].
So with years of preparation and laborious property, in 2023 we determined our future growth plan within the subsequent 5 to 10 years. And as we have launched, we’ve round 1,000 sewage therapy services overlaying 32 million — 30 million to 40 million tons of sewage to be handled, which is able to nonetheless should be managed by us; we are going to maintain growing our administration’s functionality and stage of this. So by way of the inventory; the stock available in the market — we’ll attempt to make extra income. And on the identical time, we have decided one other growth pathway within the period of stock or inventory market.
We might see that for Mainland China; from authorities bulletins in any respect ranges, extra funding shall be made into water therapy enterprise in China. Beforehand, we targeted extra on water provide plans and sewage therapy services however water enterprise is greater than that. So with know-how innovation, we arrange skilled or specialised firms to handle higher the water enterprise, which is a strategic motion that we will take. So at first of 2024, truly in 2023, we established two firms; one is BEWG Future Expertise, and BEWG Cloud Service. And these two firms; the primary one, the BEWG Expertise, it serves because the RMD platform of BEWG with the 6-7 years know-how experience accumulation previously.
We’ve developed our applied sciences and we have launched main applied sciences from each, China and overseas, and we’ll be making use of these innovative applied sciences producing continuously new worth. And our analysis institutes shall be upgraded into this BEWG Future Expertise firm, and it’ll observe a know-how pushed and market-oriented growth mode introducing innovative applied sciences from our companions; in order that we will present the newest know-how wanted by the trade. And that corresponds to our nationwide governments necessities to enhance the brand new high quality productive forces. And on the idea of this know-how firm, we are going to kind a cluster of applied sciences overlaying all useful segments available in the market, and this cluster {of professional} applied sciences, skilled firms shall be grounded on probably the most superior applied sciences within the trade.
And the second firm I will speak about is the BEWG Cloud Service firm. It adopts the trade plus web mindset and it constructs know-how structure relevant for a variety of water crops facilitating water crops upgrading and innovation; so all crops could possibly be linked as an alternative of being operated independently, which is able to considerably improve the operational effectivity of the present services. So, we imagine their operational prices shall be half of that our estimate and expectation, and this Cloud Service firm will present related applied sciences and merchandise wanted by these water crops, and that is additionally incubated underneath BEWG.
So, with these specialised or skilled firms, and the clusters of such firms as a strategic plan of BEWG, and with efficiently incubated BEUR whether or not it’s income upto RMB5 billion and its revenue was round RMB300 million as nicely.
And on the identical time, I imagine city companies or environmental sanitation; this sector is in a fast growth stage and we imagine the expansion of the EU are shall be a lot sooner than that of BEWG. And three years in the past, we got down to for BEQP [ph]; and their revenue final yr registered RMB30 million, and will probably be listed in 2025. And this yr, it’s income — it is revenue is estimated to be RMB60 million. And their most important enterprise is to create extra assembled and upgraded water crops based mostly on current water crops, offering extra superior applied sciences and companies as a tools firm. And on the identical time we even have BEWG Trade Environmental Expertise Firm; it’s engaged in complete administration of the environmental system. It was established final yr and in response to our estimate, it is going to register quick growth sooner or later as nicely.
Subsequent is about Beijing Enterprise Trump Excessive [ph] Expertise Firm; environmental know-how, and it’s targeted in clever sewage system. And so we all know that firms with funding at least RMB1 trillion can be included in the entire water enterprise pipeline community. And this firm, Trump Excessive [ph] is engaged in administration, upkeep and restore of such pipeline community techniques. It is usually our mild asset firm and it’s CAGR is roughly 100% as nicely. And in addition we’ve Fiji WellPoint [ph] engaged in filling of city garbage, and in addition strong waste therapy enterprise. And in addition we’ve BEWG Schooling going through in the direction of those that want extra instructional companies. And in addition we’ve BEWG Sensible Buy; this skilled provide service firm underneath BEWG. And we even have one other firm offering digitalized options within the Environmental Safety Water Enterprise.
And sooner or later, we anticipate that we are going to incubate a variety of new firms and in addition with cooperation with a variety of different companions within the company world and in addition universities, analysis establishments, we are going to domesticate a variety of specialised firms to higher serve BEWG’s future growth to attain secondary development. And our conventional enterprise, water enterprise, will preserve its regular development. And we imagine by the top of 2024, we are going to understand the expansion of 10% roughly. And in case your curiosity on this half, we will possibly ask a few of your questions on this facet within the Q&A session later.
And talking of the entire yr efficiency in 2024, contemplating the macroeconomic state of affairs on the market, in addition to BEWG’s growth standing, we deal with; one, core; two, primary fundamentals with money circulate as a core enterprise and consolidated group as the basics, after which we are going to obtain extra development. And we don’t put ahead necessities for the elevated quantity, and we now are holding greater than 100 contracts upto 1.4 million tons. So, that continues to be our fundamentals however in contrast with the earlier 4 million or 5 million ton, it is considerably decreased; and possibly for the entire yr, will probably be across the 1.5 million ton however we don’t suggest any additional goal.
And by way of monetary knowledge, we are going to entry extra mild asset merchandise. For operation, BEWG’s market share is round 6%, 7% and round 93% is mastered by different firms. However as a frontrunner within the trade we are going to set our goal as this by way of monetary statistics. And by way of building, the income from this section shall be decreased repeatedly as a result of there would not be a lot new challenge quantity. And for water enterprise, the rise can be 10%, and for building, will probably be decreased the 20%, and the general development price shall be round 5%. And for city useful resource service, will probably be elevated by round 20% as nicely.
So, these are conservative numbers and by way of capital bills, we anticipate it to be RMB6 billion; it’s comparatively low. And the web debt ratio shall be managed inside 150%, and we anticipate the true world state of affairs to be round 118% of roughly identical stage as this yr. So, these are all from me.
Query-and-Reply Session
A – Unidentified Firm Consultant
Thanks, Mr.Yu [ph] for the presentation. And now we transfer on to the Q&A Session. Welcome to ask questions. So, questions can’t be requested within the English Channel, however you possibly can contact the IR crew after the assembly. Sorry for the inconvenience. And for these within the Chinese language channel, please increase your questions via phone calls or within the chatting room on-line. I’ll hand over the ground to you based mostly on the order of you asking the questions. And the please introduce your self earlier than asking the query.
Unidentified Analyst
[Indiscernible]. The long run modifications within the monetary prices — monetary bills of BEWG; might you give us some steerage? There are two dimensions; the primary is rate of interest, and the second is the full quantity of that.
Unidentified Firm Consultant
So, for the rate of interest — and I imagine you might be very acquainted with that. For 2024, we maintain a really optimistic perspective. And we all know that in abroad currencies we are usually depreciate. And in China, the RMB may depreciate additional and that shall be helpful for us. And we’ve round our revenue of RMB600 million due to this. And in 2024, we might hint a few of it again, and this can be a very useful issue for us. And since we cut-off our funding, so — I imagine we can have not a lot — the newly added debt; so we have to repay the outdated debt and the financing value or the fundraising value.
In 2023, it was already very excessive; greater than 4%. Often, it was solely round 3% — 2% or 3%, and in 2024, we’re additionally fairly optimistic about this. We imagine that will probably be decreased additional, and we anticipate it to be round RMB200 million to RMB100 million; that is based mostly on our estimates, however after all, it’s not managed by us, it may be simply influenced by exterior components. So in contrast with 2023, we imagine with these two indicators — with these two dimensions up there, it had been to be roughly the identical stage.
Q – Unidentified Analyst
And in addition query from Roman [ph]. Any additional steerage on the income in 2024?
Unidentified Firm Consultant
As Mr.Yu [ph] talked about, web revenue attributable to mother or father firm will enhance by 5% in contrast with 2023, particularly by way of operational revenue. We’re assured about this due to its larger potential. So, we imagine — total talking, will probably be up by 10% in contrast with 2023 by way of inventory operation.
Unidentified Analyst
Thanks for the reply. And nonetheless a query from Leisang [ph]. Any expectations for the dividend coverage this yr?
Unidentified Firm Consultant
Final yr money circulate turned constructive, operational money circulate greater than RMB2 billion; and we anticipate the dividends — the full quantity of the dividends to stay unchanged. So, we preserve roughly the general stage of dividends.
Unidentified Firm Consultant
Thanks. Mr. Yu [ph]. If you need to speak to their administration straight; you possibly can ask a query or apply to ask a query via the phone name mode or within the chatting room of the web assembly room. So, one other query from the phone name aspect. Ibe [ph] from Hong Kong. Hello, we will hear you. You at the moment are on-line.
Unidentified Analyst
I’m from HSBC. I’ve just a few inquiries to ask. First, you talked about BEWG’s perspective in the direction of dividends in 2024. So, in — from the angle of reform of SOEs, and in addition from the angle of return for the shareholders; any particular plans? And in addition however in the long term, the place the dividends maintained unchanged on the lengthy perspective or in what case will probably be improved?
Unidentified Firm Consultant
So, I imagine that is one query generally, by way of returns for the shareholders and in addition our long-term dividend coverage. Within the subsequent three to 5 years, we are going to preserve a minimal stage of funding, not like in earlier years we had an enormous quantity of funding and we anticipate the money circulate to be continuously improved. And we imagine the dividends shall be maintained unchanged in 2024. And if the money circulate is even higher than now, we anticipate to reinforce the dividends.
Unidentified Analyst
Thanks for the reply.
Unidentified Firm Consultant
Additionally, thanks in your query. If there is no such thing as a additional query, we’ll transfer on to the subsequent query. From the phone aspect. With phone quantity ending 0805?
Unidentified Analyst
I’m [indiscernible]. I’ve just a few inquiries to ask. To start with, in 2023, we talked quite a bit concerning the rising — the expectation of the rising water provide worth. So, any newest info on this? And second query, as Mr. Yu [ph] stated, the longer term dividend stage can also be determined to some extent by money circulate efficiency. So, do you may have any particular expectation for the longer term money circulate efficiency? And is it additionally influenced by the receivable accounts? And any risk for it to enhance?
Unidentified Firm Consultant
Sure, thanks for these two questions. We mentioned quite a bit concerning the rising water provide worth. And it is actually troublesome to foretell the nationwide coverage. Nevertheless, we might go see that based mostly on the actual fact final yr, and in addition based mostly on the truth that worth have not been modified — have not been adjusted for a few of our tasks; we imagine in 2024 many of those tasks can have a better worth however it’s not for all. We all know that we’ve a division investing into this, and it is anticipated that water worth by 10 firms roughly shall be raised this yr. And that’s confirmative. So with this larger water provide worth, we imagine that the sewage worth will rise accordingly as nicely. However after all, the good thing about a better water provide worth can be the direct income generated for us with advantages straight from it. And for the sewage worth, which will get larger as nicely, we truly get hold of oblique income out of it; and that’s an oblique profit for us. And that’s the reason we maintain optimistic perspective in the direction of this rising water worth. And naturally, plenty of formalities essential to undergo.
And by way of dividends, if the money circulate efficiency retains enhancing continuously, the dividend stage may be enhanced as nicely. And if the accounts receivables efficiency can be ok, the money circulate efficiency will certainly be improved repeatedly. And that could be a large strain for lots of Chinese language firms due to the very troublesome monetary state of affairs of the federal government. It is actually troublesome — it is actually powerful to gather fee from the federal government. However nonetheless our fee assortment price of water provide is greater than 95% final yr, and for sewage it was greater than 90% a minimum of, and for water setting renovation, it was the identical efficiency to keep up all tasks run. So we imagine our funds assortment efficiency was respectable, it was okay. However after all, as China’s financial system is getting higher, and if the federal government’s paying functionality could be improved as nicely; we imagine our money circulate efficiency shall be enhanced as nicely continuously, after which the dividend will take pleasure in a greater state of affairs as nicely.
So, as we’re focusing extra on the sunshine asset challenge; so so long as we preserve our funding restricted, and on the identical time we acquire efficiently funds, I imagine the money circulate efficiency will certainly be raised.
Unidentified Analyst
And I wish to ask a follow-up query. You talked about that round 10 or a dozen water firms affirm their worth shall be enhanced. And the way a lot will it’s larger? And what’s the share occupied by these a dozen water firms within the total quantity?
Unidentified Firm Consultant
It is actually troublesome to foretell the water worth enhance, particularly as a result of it’s not determined by us as a result of the federal government want listening to periods and pointless formalities shall be gone via. However a consensus available on the market is like 30% enhance may be the case. As a result of the adjustment cannot be frequent, it could possibly’t occur each day; and we imagine generally that it may be 30% of enhance, however it might vary from 20% to 50%. And it’s actually troublesome to foretell. And we imagine that the share of those dozen firm occupied round 50% of the general quantity.
Unidentified Analyst
Thanks for all of the very clear solutions.
Unidentified Firm Consultant
Thanks.
Unidentified Firm Consultant
One other query from the phone aspect; Tamo Huan [ph].
Unidentified Analyst
Sure. I can hear you. I’ve two questions. The water provide development efficiency revenue; it decreased considerably. So possibly in 2023, the federal government had concerns and the worth adjustment may occur later? And the gross revenue in water provide has been lowering however sooner or later, what can be the cheap return on this section as a result of the general return price or the yield price is carefully associated to the rate of interest available in the market? And the second query is concerning the fee interval for the accounts receivable. How would you prefer to anticipate the fee assortment price sooner or later? And in addition the third query. Now within the [indiscernible]; in lots of provinces and areas, the environmental safety firms have been established. And when tasks expire, the federal government will nonetheless proceed these tasks, these water services and money circulate can be maintained. So which governments can be prepared to entrust us for operation? And the way would you consider authorities’s loyalty and the switch of the royalty?
Unidentified Firm Consultant
Nicely, the primary is about electrical energy prices. We talked concerning the affect of the elevating electrical energy value. And in 2023, truly, the electrical energy — the water worth was not adjusted in time however the insurance policies had been there. So for this franchise rights, normally there’s a correlation between electrical energy value and the water value. However the change in water worth may be lagged behind to some extent and we anticipate water worth to rise this yr. And by way of expectation of the return; so — there is no such thing as a — the so referred to as steerage on the cheap return with the decrease rate of interest may also be cheap return be decreased.
Unidentified Analyst
Is there any particular indication on this?
Unidentified Firm Consultant
So, with this worth monitoring system we’ve discovered concerning the completely different water worth construction in several areas. Allow us to apply for residents; it’s inverted in lots of locations and the water provide to the residents can be the most affordable. For instance, the water worth can be RMB1.5 and the fee is definitely RMB1.6, RMB1.7 larger than that, however nonetheless we generate income due to the water provide to engineering tasks, to the industries, to upkeep and restore challenge. And based mostly on water adjustment — water worth changes, we’d alter the water worth larger for worth increase; one risk. And secondly, as we have talked about we’ve a cluster {of professional} firms offering useful companies. For instance, Sensible Water enterprise to facilitate the event of the water crops, and decrease their prices to assist them generate extra revenue. However after all, one factor I must make clear; these skilled specialised firms will achieve revenue as nicely. So, sooner or later complete worth shall be generated.
And talking of the fee rep [ph]; it will be roughly 3 months based mostly on the contract, however it may be longer. And we are going to calculate our common fee assortment price for the entire yr interval. In 2022 it was fairly powerful, and in 2023 it was okay and we imagine sooner or later it is going to get higher. And for PPP challenge fee assortment, and due to the nationwide debt challenge; with PPP challenge we gained upto greater than RMB1 billion for these tasks however we’re nonetheless negotiating on PPP tasks. And possibly we are going to undertake one-time buyback of those tasks which is able to relieve the money efficiency as nicely. So with these PPP tasks or with the income sources of disappearing [ph], being decreased, and now we might see that for the federal government their debt challenge value was round simply 3%.
And why not buyback however paying me the return upto 8%? So truly the federal government would buyback prematurely, and we’d additionally obtain money circulate and we are going to make extra funding into analysis and growth of latest technological merchandise. And one challenge expired; with BEWG’s Superior Expertise we had been getting advantages, and with our Cloud Service firm and with a variety of web based mostly options we proved that BEWG is a replaceable and we might get extra tasks for operation. So these tasks will not be due to our good relationship with the federal government; that is as a result of our irreplaceable worth, we might present companies that different firms couldn’t. So with years or round a decade of expertise accumulation BEWG is completely the chief.
And we imagine we’ve alternative to open up the two.0 period of China’s water enterprise trade. It is identical to turning the cellphones, like upgrading the cellphones, upgrading or iterating or the PCs, cellphones and know-how tasks and product. And within the water enterprise with mild asset tasks and with much less and fewer funding, we will nonetheless obtain extra income sooner or later due to know-how. With simply what we’ve available in the market, it’s actually troublesome to develop any additional; possibly not even 10%. So this can be a primary logic for our enterprise development sooner or later.
Unidentified Firm Consultant
Thanks for this query. And thanks in your reply, Mr. Yu [ph]. And subsequent query from Chen Shu Shing [ph]. Additionally on the phone name.
Unidentified Analyst
Hello, are you able to all hear me?
Unidentified Firm Consultant
Sure, no downside. It is loud and clear.
Unidentified Analyst
Hello, Mr. Yu [ph]. Hello, administration. I’ve two questions on capital bills. Based mostly on the annual report, we imagine sooner or later we shall be mild asset challenge oriented. However nonetheless, the manufacturing functionality in operation remains to be upto RMB10 million per day. What is the plan for this half? And the way a lot capital bills is required for this a part of operation? And the second query is that if no additional funding shall be made into heavy asset or tax [ph], however all mild asset challenge. And what would be the minimal capital bills for these operation challenge for these mild asset challenge?
Unidentified Firm Consultant
Okay, let me reply your first query. So it is concerning the distinction between our working water quantity and designed water quantity. And a number of the tasks have been post-point [ph]; we completed first interval of these tasks. For instance, we completed first the 50,000 ton, and it is designed to be 100,000 ton, and we completed the primary 50,000 ton and possibly in 5 years, we are going to end one other 50,000 ton. However when that point comes, possibly there is no want anymore, however the contract remains to be there. So we nonetheless wanted to calculate age based mostly on the designed quantity which is 100,000 ton. So we imagine that within the subsequent yr, the pure elevated — naturally elevated water challenge shall be as much as round 1 million ton amounting to RMB2 billion, RMB3 billion.
And because it’s already lined by the contract, so we have to make this funding, in any other case the federal government would assume that is a violation of the contract. So you possibly can perceive as a passive absorption of the contracted quantity; however after all by the point when the second interval comes, possibly it is not wanted anymore and it will not be funded by the federal government. So, we will name it the passive absorption of the contracted quantity. And it is round 1 million ton per yr and it is amounting to an funding of RMB2 billion, RMB3 billion.
And talking of a capital bills; in 2024 will probably be RMB6 billion. And as I perceive, will probably be primarily about building; it doesn’t contain any replace of apparatus expiring. And for sewage, it is RMB2 billion, RMB3 billion; and for water provide it’s RMB3 billion. So altogether, it is RMB6 billion. And in contrast with the full capital bills, it’s only a very small piece. So if we cease investing, and we simply preserve capital bills for manufacturing operation, for instance, if the ability breaks down, we have to spend cash to keep up and restore these services. So it is my be anticipated to be RMB5 billion or RMB6 billion
Unidentified Analyst
For different — for the general capital bills?
Unidentified Firm Consultant
That is the expectation we offer. So the so-called capital bills can be investments on to the development tasks on BOT Development of economic consolidation.
Unidentified Firm Consultant
Sure, thanks. Thanks for this query. And thanks Mr. Yu [ph] for the reply. And the subsequent query from Li Chong [ph].
Unidentified Analyst
Hello, are you able to hear me?
Unidentified Firm Consultant
Sure, no downside.
Unidentified Analyst
Mr. Yu [ph], I’ve just a few inquiries to ask. First, we will see absolutely the worth of accounts receivables; it’s decreased. And I need to know that in water provide and sewage with no apparent enhance, how would you prefer to anticipate the account receivables of BEWG sooner or later nonetheless to be maintained at round RMB10 billion? And the way would you prefer to see the management of accounts receivables sooner or later? Any good method to successfully management it?
And second query, from the annual report we’ve realized the money circulate efficiency turned constructive and it covers capital bills. So, I wish to state that with the money circulate upto greater than RMB2 billion it will cowl the bills after all, and on this facet, underneath such circumstances with additionally the excessive stage of dividends; how would you prefer to repay the debt in a while.
And third, talking of the modifications in water worth — larger water worth would generate extra income for the federal government? And from the corporate’s perspective, how can we assure that firms can profit from water worth rise? Thanks. These are my questions.
Unidentified Firm Consultant
Thanks for these three questions. So the primary two questions are fairly comparable. Talking of the accounts receivable; as I stated final yr, BEWG realized that accounts receivable is kind of essential. So fee assortment has been one of many precedence or the most important precedence for BEWG lately. So in 2023 we’ve carried out it nicely, and as you see it is decreased barely; as you can see, it’s extremely laborious one state of affairs. And so with our inventory enterprise, round greater than RMB30 million, I believe reaching our manufacturing goal is already a very simple job for us. And to complete the entire financial circulation, we’d like to ensure the fee is collected — the fee is completed. And in addition, we’re confronted with challenges, additionally from the rivals. As we stated that the era of income from water value comes from two points; the primary is water provide to the residents, and second, we might see that the federal government subsidies play an important position. As a result of per ton of water, the residents will simply pay RMB0.9. And generally total value could possibly be upto RMB3 or RMB4 and the federal government must cowl a giant proportion within the water value with our subsidies. And since we have stepped up our fee assortment endeavour, we imagine that the fee assortment price is sweet, it is 95% of all water provide, and 90% for sewage, and we imagine it is respectable sufficient efficiency.
And talking of the operational actions, you describe it as a excessive stage of dividends. Nicely, it’s nonetheless not more than the revenue; not for this yr, proper. So, despite the fact that it is a very excessive stage of dividends, it won’t surpass the revenue. So long as we will preserve a benign efficiency of fee assortment, we imagine we might pay the debt by the financial institution. And from a current debt challenge efficiency, we had been fairly good. And that signifies that from the financial institution’s perspective, BEWG’s debt repaying functionality is sweet and in addition with a really enticing worth for individuals to purchase. And naturally, for those who have a look at all the cycle, there is no such thing as a downside with it; we acquire the fee and we repay the debt, however after all on the prerequisite of constructive money circulate and in addition the money circulate transferring in the direction of a greater route.
And the third query is about the advantages of water worth adjustment. So, if it’s a water firm — if the entire lifecycle of water for the entire metropolis is roofed by this complete firm; pipe community, water transport, and the drainage. After which this firm will profit straight from the water worth adjustment; for those who arrive the water worth at this time, tomorrow I’ll earn way more. However for sewage therapy service, it’s not this fashion; it’s oblique. As a result of it’s carefully associated to water provide, so if the water just isn’t provided by our firm, we couldn’t generate in that route [ph] — we couldn’t generate a direct income from it. However after all, if a authorities caught in a really troublesome monetary state of affairs; it could include the water worth adjustment to tempo. And in addition the fee shall be carried out and our fee assortment shall be higher. So for water worth adjustment, it is going to undoubtedly be helpful however for water provide it’s — it’s direct, and for sewage, it’s oblique.
Unidentified Firm Consultant
Thanks, Li Chang [ph] in your query. And thanks Mr. Yu [ph] for the reply. And subsequent query is John Chow [ph].
Unidentified Analyst
In 2023, what had been the money circulate of operational actions of water provide and sewage therapy respectively? So, money circulate with the operational actions is especially about fee assortment; and for water provide is one — RMB15 billion.
Unidentified Firm Consultant
No, the full fee assortment was RMB16.5 billion, and for water setting it was round RMB2 billion.
Unidentified Analyst
And Joe Chang [ph] requested the executive expense was RMB1.67 billion within the second half of the yr, growing considerably in contrast with RMB1.3 billion; so what was the rationale behind?
Unidentified Firm Consultant
Okay. So, that is — this occupies a much bigger share. So, we didn’t put together totally for this query however it was additionally influenced by the monetary consolidation with BEUR in each, first and second half of the yr. So in contrast with first half of the yr, it was a major enchancment; however for those who examine it with 2022, it was mainly fairly comparable and there was no additional administrative expense as a result of we had strict monetary management lately. So genuinely, the expense and income ratio in 2023 decreased as a result of the income elevated by 14% and the bills barely reproduced even.
Unidentified Firm Consultant
Thanks. And one other query from Chai Peng Yo [ph].
Unidentified Analyst
Will there be a recording for the entire assembly?
Unidentified Firm Consultant
Sorry, we don’t present the playback. And one other query from Extra [ph].
Unidentified Analyst
What’s the fee assortment price of PPP tasks? Any danger about non-performing debt or fee assortment on these tasks?
Unidentified Firm Consultant
PPP tasks generally is a very basic idea, it covers water enterprise; water service and water environmental renovation. Final yr for water environmental renovation, it was round 70%, and for water floor it was round 90%, and for water provide it was 95%; the fee assortment.
Unidentified Firm Consultant
One other questions on Pang Wu [ph] on the decision.
Unidentified Analyst
Hello, are you able to hear?
Unidentified Firm Consultant
Sure.
Unidentified Analyst
So, I’ve just a few questions. To start with, you realize our plan for 2024 for the water service it is going to enhance by round 10%. And the place will that come from?
Unidentified Firm Consultant
It covers the next points. To start with, we can have actual business water tasks bringing revenues and income. And secondly, we’re merely decreasing the water plant operation prices, controllable prices, and we’re anticipated to acquire extra operational tasks. So if we don’t think about coverage curiosity will probably be like this, however after all for hyper [ph], we couldn’t management that however excluding the hyper components, will probably be a ten% enhance.
Unidentified Analyst
My second query; final yr was consolidation of economic statements of BEUR is anticipated to extend 20% this yr. And is it after a secondary proposal, nicely as a result of it invests into environmental sanitation service or extra precisely, it’s concerning the total city administration contains city setting cleansing, city facility administration together with visitors lights, public bogs, etcetera. And really 20% is low, we’re anticipated to be 30% to 50%. As a result of you realize, this sector is rising so quick. And the federal government’s can pay; native governments can pay for that, sure. And if we see this as a most important rising development level in our firm, as a result of it covers the residential use, will it’s any strain on our money circulate or fee assortment?
Unidentified Firm Consultant
No. It is fee assortment performs even higher than the water therapy service as a result of quite than prioritized fee to environmental sanitation, for those who do not forget that’s within the metropolis in North China final yr, sanitation employees undergo from again pay [ph], and that permits plenty of sensation in public opinions. So, the federal government begin to prioritize paying the sanitation quite than to city environmental sanitation, it’s much more essential than the water therapy. And that could be a essential job for the federal government to ensure. So at current, we don’t fear in any respect about funds collected from this sanitation section.
Unidentified Analyst
Okay, thanks. Our subsequent query; by way of technical consulting service, we’re anticipated to develop 5%. However in 2023 it decreased by round 10%, greater than 10%. So, how can we get this 5% enhance?
Unidentified Firm Consultant
Nicely, it was decreased due to the decrease wants final yr and the enterprise lined by our [indiscernible] institute had been decrease. And that was a basic pattern final yr. Design [ph] Institute suffered quite a bit final yr. And these two Design Institute’s [ph], once they function fairly nicely, their revenue can be upto RMB100 million mixed. However after all, if they will preserve the current stage, different skilled firms enterprise together with the tools firm, pipeline community, industrial environmental safety firms, they’ll all register development upto 50%. However that’s on the low base. And possibly in years, their income can be upto RMB100 million. And that may value the general 5% of enhance as you stated. And for the design institute, we don’t anticipate them to make a breakthrough however plenty of revenues shall be generated from different sectors of our enterprise.
Unidentified Analyst
And in addition about legal responsibility; on the stability sheet I might see that in contrast with 2022, 2023 fastened time period liabilities shrunk?
Unidentified Firm Consultant
No. Perhaps it was due to completely different forex. This yr all figures had been in RMB not Hong Kong greenback. And you’ll verify it extra rigorously later. So for the fastened time period legal responsibility, it was roughly on the protected stage. It barely decreased however you possibly can take into account it as a — at an identical stage. And for the money this yr, we’ll — we use a part of the money to repay the debt, we are going to attempt our greatest to keep up the extent of debt. And the funding shall be inside a restricted scale and in 2025, will probably be even at a decrease stage. So, we don’t plan to make use of a lot of the money for debt reimbursement however for these excessive curiosity debt, we might repay it, and we need to maintain many of the money owed at a decrease price till the abroad debt once they remade them, and we are going to know extra within China due to the distinction within the price as nicely; it is upto 2 to three share factors.
Unidentified Analyst
Okay. The final query concerning the accounts receivable within the water environmental renovation. Within the final decade, it has collected upto RMB20 billion. If the accounts receivables decreased sooner or later, will it affect the dividends? Will it decrease the dividend?
Unidentified Firm Consultant
Whether it is potential to depreciate, I imagine that was carried out mainly within the earlier yr’s already with accounts receivable now. And naturally, as you say, it is RMB20 billion however most of them have been collected. And sooner or later, I do not know the way a lot. The one danger often is the authorities’s going chapter and the federal government’s won’t pay, and possibly all industries will undergo from plenty of issues by then. And with PPP challenge contract if BEWG has achieved all of the tasks, and now it is the time for the federal government to pay. If the federal government couldn’t pay, possibly we might deal with the problem with a lawsuit however it can’t be addressed, it is not determined by BEWG.
Unidentified Analyst
However will that affect the promise of dividends?
Unidentified Firm Consultant
Nicely, a minimum of for 2024 we don’t assume it is going to have an effect on the dividends. However sooner or later, if any unpredictable change occurs; I’m not certain as a result of I am unable to say something concerning the dividend coverage change on behalf of the Board. And simply based mostly on the present state of affairs; it is not very possible. Even when it is going to happen, it is not very seemingly although. Up to now years, we might see that we gained about greater than RMB1 billion, and the fee assortment in 2023 carried out higher than 2022. And for those who requested me to be pessimistic, that is not potential as a result of in 2023 it was fairly good. So why ought to I predict a foul efficiency in 2024, 2025? If it was additionally in 2023, I could have a extra pessimistic perspective however the case just isn’t true.
Unidentified Analyst
Okay, thanks. These are all my questions. Thanks very a lot.
Unidentified Firm Consultant
Thanks, Mr. Chan [ph] in your help to the corporate and thanks in your query. Our subsequent query from the cell phone aspect, Luke Cohen [ph].
Unidentified Analyst
Hello, are you able to hear me? In 2023, capital bills RMB6.8 billion, and in 2024 it will be decreased. Do you may have any framework or possibly you take into account any buyback? So, what’s the coverage about buybacks and dividends? In 2024 it’s anticipated to be RMB6 billion?
Unidentified Firm Consultant
No, we should not have buyback plan. And if we’ve any buyback plan, we can have board conferences to make selections. And for the dividend coverage money flows has been constructive for 2 years consecutively, it has been fairly good. We preserve comparatively excessive stage of dividends and we predict that the money circulate will maintain enhancing and if it improves considerably, we might increase the extent of dividends. Due to the risky market state of affairs, I do not know if any corresponding coverage shall be taken. So far as I do know, we’ve not acquired any such orders or directions. And for those who seek advice from the Annual Report extra rigorously later, you’ll have the clue as a result of one in all our international traders — for the very first time final yr, we introduced all our ends in our RMB; so it is round a distinction of 8% [ph]. Our individuals might have misunderstandings however we’re not certain; possibly the forex will trigger some misunderstanding, so seek advice from the Annual Report later extra rigorously.
Unidentified Firm Consultant
Thanks for the solutions, administration. We see one other query from Zhao Zhao [ph]. In all the symptoms for steerage of 2024 for water therapy enterprise there shall be enhance of 10%. Does it imply that for water provide and sewage therapy?
Unidentified Firm Consultant
Each Sure.
Unidentified Firm Consultant
And if you wish to straight talk with the administration, you possibly can apply to ask the query on each, the phone name aspect and in addition within the on-line assembly room. Since there is no such thing as a additional query we wish to finish our assembly for at this time. Thanks in your consideration. Thanks in your questions, and thanks solutions, administration.
Unidentified Firm Consultant
Thanks in your very long time help to BEWG. And hopefully, we will meet you subsequent time. And in addition if in case you have any questions, do not hesitate to contact IR Group [ph].