| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 21.82 | 377 |
| Intrinsic value (DCF) | 2.57 | -44 |
| Graham-Dodd Method | 0.92 | -80 |
| Graham Formula | 0.75 | -84 |
Chongqing Water Group Co., Ltd. is a leading integrated water utility company based in Chongqing, China, providing essential water services to one of China's largest municipal populations. The company operates across the entire water value chain, including water supply, sewage treatment, engineering construction, and facility maintenance. Serving approximately 3.972 million urban residents with water supply and 89.13 million people with sewage treatment services, the company maintains critical infrastructure for Chongqing's rapidly growing metropolitan area. As a subsidiary of Chongqing Derun Environment Co., Ltd., the company benefits from stable regulatory frameworks and predictable cash flows typical of utility operations. Chongqing Water Group represents a vital infrastructure play in China's utilities sector, offering exposure to essential services with demographic tailwinds from urbanization. The company's integrated business model covering construction, operation, and maintenance positions it as a comprehensive water solutions provider in one of China's most important economic regions.
Chongqing Water Group presents a defensive investment profile with stable regulatory returns and essential service characteristics, though growth prospects appear modest. The company generates predictable cash flows from its monopoly-like position in Chongqing's water market, supported by CNY 2.33 billion in operating cash flow. However, the company faces significant capital expenditure requirements (CNY -2.83 billion) to maintain and expand infrastructure, resulting in negative free cash flow. With a market capitalization of CNY 22.75 billion and modest net income of CNY 785 million, the stock trades at reasonable valuations. The 0.8% dividend yield provides income support, while the extremely low beta of 0.031 indicates minimal correlation to broader market movements. Key risks include regulatory rate changes, environmental compliance costs, and the capital-intensive nature of water infrastructure requiring continuous investment.
Chongqing Water Group enjoys a dominant regional monopoly position as the primary water utility serving Chongqing municipality, one of China's largest and fastest-growing urban centers. The company's competitive advantage stems from its exclusive operating rights within its service territory, high barriers to entry due to massive infrastructure requirements, and regulatory protection as an essential public service provider. The integrated business model spanning water supply, sewage treatment, and engineering construction creates operational synergies and cost efficiencies. However, the company operates in a highly regulated environment where tariff structures are determined by government authorities, limiting pricing power and profitability margins. The capital-intensive nature of the business requires continuous investment in infrastructure maintenance and expansion, constraining free cash flow generation. While the regional monopoly provides revenue stability, it also creates geographic concentration risk and limits growth opportunities beyond the Chongqing region. The company's scale advantages in serving a massive population base provide operational efficiencies, but competition for capital allocation with other Chinese infrastructure projects remains a consideration.