Renewable energy operation and resource recycling ushered in a number of policy support. 1. On January 18, the national development and Reform Commission and the National Energy Administration issued the guiding opinions on accelerating the construction of a national unified power market system. The scheme is conducive to alleviating the problems of incomplete system, imperfect functions, inconsistent trading rules and market barriers in cross provincial and cross regional transactions in China’s power market. Promote the formation of new power systems with strong new energy consumption capacity, and benefit renewable energy power operators. 2. The general office of Jiangsu provincial Party committee issued the implementation opinions on promoting high-quality development and doing a good job in carbon peak and carbon neutralization. The plan proposes to speed up the construction of waste recycling system, establish and improve waste resource recycling and recycling system, strengthen the comprehensive utilization of bulk solid waste, promote the comprehensive utilization of domestic waste and industrial waste, and benefit the head sewage treatment company and the construction and operation company of waste incineration project; The plan proposes to vigorously develop non fossil energy. On the premise of ensuring safety, orderly develop nuclear power, standardize and orderly develop hydrogen energy, promote the integrated development of scenery, water and fire storage, and speed up the construction of new power system. It is recommended to pay attention to (1) hazardous waste disposal companies with rich projects and strong technical barriers Zhefu Holding Group Co.Ltd(002266) ; There are many high-quality projects for hazardous waste and waste incineration, and the operation is accelerated Beijing Geoenviron Engineering & Technology Inc(603588) ; (2) Companies with aggressive renewable energy installation targets and excellent quality in the power sector have investment opportunities related to the upstream industrial chain.
The financing has recovered, the space is broad, and the value of environmental protection allocation is prominent. Since 2019, the interest rate has dropped, state-owned assets have taken ownership, and the debt financing of environmental protection enterprises has improved significantly. The new refinancing regulations have been issued to solve the difficulties of enterprise equity financing and eliminate the most important factor of suppressing PE in the sector. In 2019, the total amount of environmental protection special bonds was 54.6 billion yuan, with a total of 232.4 billion yuan in 2020 and 212.8 billion yuan as of October 29, 2021; Since 2020, the proportion of environmental protection special bonds has increased: in 2019, the proportion of environmental protection special bonds has increased to 2.5%, 6.3% in 2020, and further increased to 7.5% by October 29, 2021. The Fifth Plenary Session of the 19th CPC Central Committee unswervingly adheres to the construction of ecological civilization. The goal is to achieve new progress in the ecological environment during the 14th Five Year Plan period, achieve a fundamental improvement in the ecological environment by 2035, and the industry itself has broad growth space under the catalysis of the great protection of the Yangtze River and the Yellow River Basin and waste classification.
Valuation bottomed out, focusing on stable operating assets and companies with reversed fundamentals. Over the past three years, the performance of the environmental protection sector has been sluggish, and the valuation and positions are still low. The introduction of environmental protection REITs provides new equity financing tools. Pollution control operations such as urban sewage and waste treatment, solid waste and hazardous waste treatment are key industries. Enterprises with strong technical advantages and high wall barrier are favored. 1. Waste incineration companies with strong growth and certainty, Focus on Zhejiang Weiming Environment Protection Co.Ltd(603568) (ROE industry-leading and sufficient orders), Grandblue Environment Co.Ltd(600323) (steady growth and obvious valuation advantages); 2. Hazardous waste disposal companies with rich projects in hand, strong technology and high barriers pay attention to Zhefu Holding Group Co.Ltd(002266) (new leader of hazardous waste and layout of the whole industrial chain), Beijing Geoenviron Engineering & Technology Inc(603588) (leader of soil remediation benefiting from financing improvement); 3. Water companies whose value is expected to be revalued pay attention to Hongcheng water industry (Jiangxi sewage market has great potential, and the valuation and dividend rate are attractive).
Industry news: 1) the State Council issued the comprehensive work plan for energy conservation and emission reduction in the 14th five year plan; 2) The 14th five year plan for ecological and environmental protection in Hebei Province was printed and distributed; 3) The implementation plan for strengthening the supervision, utilization and disposal capacity of hazardous wastes in Jiangsu Province was printed and distributed.
Risk tip: the environmental protection policy and supervision are less than expected, and the industry demand is less than expected.
