China and France Water withdrew from the Shanghai Stock Exchange's main board IPO. The controlling shareholder is a local state-owned enterprise.

China Water Co., a water utility listed on the Shanghai Stock Exchange, has withdrawn its IPO application.

China Water Co., a water utility listed on the Shanghai Stock Exchange, has withdrawn its IPO application.

The prospectus shows that China Water Co. is a water utility serving small and medium-sized cities, and is dedicated to providing professional water utility services. Its main business includes water supply, sewage treatment, municipal waterworks engineering and smart water services.

China Water Co. is based in Changshu, Jiangsu Province, and has unique advantages in terms of regional layout, cooperative operation, business structure, management level, production technology and service level. It will continue to maintain and consolidate its water utility market in Changshu City and actively develop markets outside the city to achieve cross-regional operation and promote the development of its water utility business.

In terms of performance, China Water Co. achieved revenues of Rmb8.02bn, Rmb10.22bn and Rmb4.97bn in 2020-2022H1, and net profit of Rmb1.66bn, Rmb1.56bn and Rmb76.69mn respectively.

It is worth noting that the water supply and sewage treatment franchise prices of China Water Co. have not been adjusted as expected. The water supply price of China Water Co. must be approved by the government. According to relevant regulations, the water supply price in urban areas should follow the principle of "covering costs, reasonable profits, water conservation and fair burden" and be formulated on the basis of cost monitoring, and the method of "approved cost plus reasonable profit" should be adopted. Although the above water fee pricing principles and price adjustment mechanisms provide a guarantee for the reasonable profit of the company's water supply business, due to the lagging nature of water price adjustment, which requires the company to apply to the local government's price department, go through the legal procedures of government approval and resident hearings, there is a risk that the water supply business revenue will not be able to fully match the changes in cost and expenses. In addition, the water price adjustment is affected by the level of social prices, and there is a risk that the price adjustment will be insufficient to affect the company's operating results and financial status.

In terms of shareholding structure, the controlling shareholder of China Water Co. is Changshu Municipal Bureau of Capital Operation, which indirectly controls 65% of the Company's shares through China Investment Co.

Looking back at its IPO process, China Water Co. applied for the main board IPO in March 2020, and was transferred to the Shanghai Stock Exchange in March 2023 under the registration system. The IPO lasted for more than 4 years. In this IPO, China Water Co. originally planned to raise Rmb2.86bn to fund the Changshu Economic and Technical Development Zone Industrial Sewage Treatment Plant Project and repay bank loans. The Shanghai Stock Exchange issued a round of questions in March 2023, but China Water Co. has not responded to the questions as of the withdrawal of the IPO.