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Beijing Enterprises Holdings Ltd 00392

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Morningstar’s Analysis

Valuation
Currency in HKD
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Economic Moat

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Capital Allocation

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BEH’s 2020 Results Missed; Expecting Recovery in 2021

Jennifer Song Senior Equity Analyst

Analyst Note

| Jennifer Song |

Beijing Enterprises Holdings’, or BEH’s, 11% drop in recurring net profit to HKD 7.2 billion slightly missed our expectations, with weakness across major segments. This marks the first profit decline over the past 10 years for the conglomerate, reflecting the pandemic impact. Overall, we expect activity to normalize in 2021 from the pandemic disruptions but we note that BEH’s 40% held Shaanxi-Beijing pipeline has witnessed some unfavorable changes, with rising demand from short-haul transmission. This led to a 23% fall in unit profit contribution, and the change is likely structural, according to management. We tweak our earnings forecasts to factor in a lower contribution from the Shaanxi-Beijing pipeline, and we forecast BEH’s net profit to rise 50% to HKD 7.9 billion in 2021, a 6% cut from our previous forecast. Accordingly, we lower our fair value estimate to HKD 44.50 per share, from HKD 48.50.

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Company Profile

Business Description

Beijing Enterprises Holdings was founded in 1997 and it is the listed flagship of the Beijing municipal government. It has a diversified business portfolio with focus on public utilities, including gas distribution and transmission, sewage and water treatment, and waste-to-energy business. It also invests in an upstream Russia oil and gas company and owns 80% of Yanjing Brewery, the third- largest domestic brewer. The business mix is approximately two third in gas transmission and distribution, with the rest in water, waste treatment, upstream oil and gas, and beer businesses.

Contact
18 Harbour Road, 66th Floor, Central Plaza
Hong Kong, Hong Kong
T +852 29152898
Sector Industrials
Industry Conglomerates
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 39,000

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