Up to now, more than 100 companies in the A-share and Hong Kong-listed utilities and environmental protection industries have released their 2023 annual reports. Most of the utilities companies have shown solid growth, reaffirming the high level of performance certainty in the sector. Among them, the performance of Volkswagen Public is particularly eye-catching, and its net profit attributable to the parent company after deducting non-recurring gains and losses in 2023 will grow significantly.
According to the 2023 annual report of Volkswagen Utilities, the company achieved an operating income of 6.303 billion yuan in this fiscal year, an increase of 9.26% compared with the same period last year, successfully refreshing the historical record, and the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses increased by 223 million yuan year-on-year, an increase of 74.81%! This achievement is the second peak achieved by the company since its listing, only slightly lower than the highest data in 2016. It can be said that the public utility has basically returned to the peak of historical performance.
An in-depth analysis of this financial report, it is not difficult to find that the company has not only achieved significant growth in performance, but also achieved high-quality growth. The company's overall debt level has been effectively improved, demonstrating a sound financial structure. At the same time, the company's cash flow remains abundant, laying a solid foundation for future development.
Focus on the main business of public utilities
The achievement of this series of achievements is due to the company's optimization of business structure and precise strategic layout in 2023. Focusing on its main business, the company continued to consolidate the strength of the utilities sector and achieved stable operation. In the field of financial venture capital, the company has maintained a cautious attitude and effectively avoided potential risks by promoting the orderly exit of projects.
During the reporting period, the company steadily promoted the development of gas business. According to the financial report, in 2023, the company's revenue from gas sales increased by 11.03% year-on-year to 5.358 billion yuan, a year-on-year increase of 11.03%, and the gross profit margin increased by 1.62 percentage points year-on-year to 10.33%. Dazhong Utility has extensive market penetration in the Yangtze River Delta region, serving millions of users through a pipeline network of thousands of kilometers, and has a strong market foundation. Shanghai Dazhong Gas strengthened its competitive position by steadily expanding incremental business, while Nantong Dazhong Gas completed the price adjustment and the development of a smart gas integrated management platform. During the reporting period, Shanghai Dazhong Gas achieved 1.02 billion cubic meters of natural gas sales, a year-on-year increase of 5.92%, while Nantong Dazhong Gas sales reached 380 million cubic meters, a year-on-year increase of 7.13%.
Since 2023, many places across the country have successively promoted the policy of affordable prices for residents to solve the problem of inverted sales prices at the residential end of urban gas companies and ensure residents' gas consumption. According to statistics, from 2022 to February 2024, a total of 135 cities (accounting for 47%) at and above the prefecture level across the country have carried out residential gas prices, with a price increase of 0.22 yuan per cubic meter. Soochow Securities Research Institute believes that the off-season is coming, and the cities that have not carried out the price will continue to use the window period of the off-season to continue to promote the price, and it is expected that before the arrival of the heating period in 2024 (before the end of October 2024), there will be more cities to promote the price of the landing, and the reasonable value of the urban gas distribution fee is more than 0.6 yuan / square, and the price difference still has 20% room for repair. Under the influence of the upward trend of spreads, the resilience of Volkswagen's utility gas business is expected to continue to expand.
In terms of sewage treatment business, the company achieved revenue of 312 million yuan during the reporting period, a year-on-year increase of 17.21%. At present, the company operates a total of 9 sewage treatment plants in Shanghai and Jiangsu, with a total treatment capacity of 440,000 tons/day. Among them, the subsidiary Volkswagen Jiading has a daily treatment capacity of 175,000 tons, and the effluent standard has reached the highest sewage discharge standard in Shanghai, Class 1 A+, while the subsidiary Jiangsu Volkswagen currently has a total business of 265,000 tons per day in Yunlong District, Jiawang District, Pei County, Pizhou City, Xuzhou City, Jiangsu Province and Donghai County in Lianyungang. These projects have entered a stable and mature stage and have become high-quality assets with low volatility and high dividends.
It is worth mentioning that during the reporting period, the company actively undertook social responsibilities, greatly contributed to people's livelihood, and once again ranked among the "2023 Shanghai Top 100 Service Enterprises". In 2023, Shanghai Dazhong Gas will complete two municipal government practical projects: "replacing gas appliance connection hoses for existing piped natural gas residential users" and "installing gas alarms for the elderly living alone". In addition, Shanghai Dazhong Gas and Dazhong Operation Logistics became the supply guarantee units of the 6th China Import Expo, and successfully completed the luggage transportation guarantee task of foreign dignitaries and delegations at the 6th CIIE, which was praised by the Shanghai Municipal Foreign Affairs Office. All of the above shows the heavy responsibility of the public public.
Science and technology empowerment to promote the virtuous cycle of "science and technology-industry-finance".
Looking from top to bottom, it is not difficult to find that the development of the digital economy has become the strongest voice of the times. The 14th Five-Year Plan for the Development of the Digital Economy proposes that China will further promote the development of the digital economy, and by 2025, the digital economy should enter a comprehensive expansion mode, and the added value of core industries in the digital economy should account for 10% of GDP.
This year's government tasks will vigorously promote the construction of a modern industrial system and accelerate the development of new quality productive forces in the first place. The new quality productivity is a new type of productivity that is different from the traditional productivity, a productivity based on scientific and technological innovation, a new type of productivity that gets rid of the traditional growth path and meets the requirements of high-quality development, and is also the key focus of the mainland to reshape the new advantages of global competition in the new era. At present, the mainland is in a critical stage of economic digitalization.
In this context, based on digital and intelligent technologies, Volkswagen Public Utilities realizes the deep integration of public utilities and digital economy, and creates new formats, new models and new scenarios of smart public utilities that integrate data and reality.
Specifically, in terms of city gas, through the application of ERP system, the company has cooperated with a number of units to actively expand extended services and continuously increase the proportion of revenue from gas value-added services;
In the urban transportation and logistics transportation business, Volkswagen Public has also actively explored and innovated. In terms of urban transportation, the company has improved the operational efficiency of the urban transportation system through functions such as the "Mass Travel APP" in combination with the Internet model. In terms of logistics and transportation, the company has realized the integrated management of a variety of logistics operation resources with the help of its self-built logistics public information service platform and supply chain collaborative innovation service platform, providing users with efficient and convenient logistics vehicle services.
It can be seen that the public utility promotes the transformation of public utilities to digital and intelligent, which not only brings more efficient and convenient public services, but also injects new impetus into the sustainable development of cities. In the future, with the continuous progress of technology and the deepening of applications, Volkswagen Public Utilities will continue to play a leading role and make greater contributions to the construction of smart public utilities, smart cities, and the development of the digital economy.
In addition to directly empowering public utilities with technology, Dazhong Public has long had a forward-looking layout in the field of financial venture capital, and promoted the development of the technology industry and the digital economy by guiding the efficient allocation of funds. In the face of an increasingly complex investment environment, the company has adopted a more prudent strategy, focusing its efforts on utilities and promoting the steady exit of invested projects. This strategy not only helps the company optimize its business portfolio, but also lays a solid foundation for the company's long-term development. In the future, through the virtuous cycle of "technology-industry-finance", public utilities are expected to contribute more to the vigorous development of the digital economy.
Actively give back to investors
As mentioned at the beginning, the company has achieved high-quality growth, not only in terms of paper profit, but also in terms of its real cash flow value has also improved significantly. During the reporting period, the net cash flow generated by the company's operating activities increased by 272 million yuan year-on-year, an increase of 65.26%, and in terms of asset-liability ratio, the company showed a stable financial position, which decreased to 57.36% year-on-year, a decrease of 2.03 percentage points over the same period last year. A stable cash flow helps the company to predict its future funding position, while good earnings and a reduced level of debt help to increase the company's distributable profits, which can be used for dividends.
According to the announcement, the company announced a cash dividend of 0.35 yuan (tax included) for every 10 shares, and the share payment ratio was close to 50%. Dazhong Public has always had a good history of paying dividends, and insists on repaying the trust and support of shareholders and investors through continuous and stable dividends. The company has maintained a share-based payout ratio of close to 50% for most of the years since its listing. Even under the special circumstance of profit loss in 2022, the company still insists on paying dividends, demonstrating the company's sincerity and high sense of responsibility for shareholders and investors.
Volkswagen Public Utilities has three characteristics: stable operation, abundant cash flow and stable dividends. When the economic trend is uncertain, there is a lack of clear economic clues, and high-prosperity industries are relatively scarce, these three advantages will be magnified, and it is expected that they will continue to be given a certainty premium.
This is reminiscent of Warren Buffett's strong emphasis on investing in the utilities sector. Berkshire Hathaway owns a number of utilities, such as hydroelectric energy faucets, and has achieved long-term solid investment returns. These companies are highly resilient because they provide the basic necessities – no matter what, people will always need electricity, gas and running water (including sewage). As a result, good utilities typically have solid fundamentals and stable cash flows that can withstand cyclical considerations. In addition to the three advantages, Berkshire Hathaway's "penchant" for utilities often has a longer-term perspective – utilities often face strict regulations and barriers to entry, which creates a high competitive barrier for industry leaders, which can help companies maintain profitability in the long term and bring stable returns to investors.
To sum up, Volkswagen's performance in 2023 can be summarized as good financial performance, stable operating strength and stable and continuous dividend policy. Looking ahead, we expect the company to continue to be strong, continue to return to shareholders and achieve long-term value growth."