Key investment points
Carbon market tracking: China: from March 7 to March 11, the trading volume of the national carbon market carbon emission quota (CEA) listing agreement was 6500 tons, a decrease of 97.95% on a weekly basis. On March 11, 2022, the transaction of carbon emission quota (CEA) in the national carbon market was 10100 tons. The opening price was 57.60 yuan / ton and the closing price was 57.60 yuan / ton. The closing price increased by 0.59% compared with the previous day and decreased by 0.52% on a weekly basis. From February 28 to March 4, the total trading volume of carbon emission quotas in eight pilot cities in China was 625900 tons, with a week-on-week increase of + 131.29%; The average transaction price of quota was 44.29 yuan / ton, with a week-on-week increase of + 10.91%; The trading volume of CCER was 404500 tons, with a week on week ratio of + 326.31%. EU: from March 7 to March 11, the trading volume of EU carbon emission quota futures totaled 213 million tons, with a year-on-year decrease of – 1.4%. The weekly change value was 124 million tons, with a week-on-week decrease of – 36.7%; The average transaction price was 68.27 euros / ton, with a year-on-year increase of + 67.0%. The weekly change value decreased by 1.38 euros / ton, with a week-on-week decrease of – 2.0%.
Portfolio this week: Zhejiang Weiming Environment Protection Co.Ltd(603568) + Beijing Geoenviron Engineering & Technology Inc(603588) + Shengyuan Environmental Protection Co.Ltd(300867) + Jiangxi Hongcheng Environment Co.Ltd(600461) + Shanghai Sheng Jian Environment Technology Co.Ltd(603324) current market (3.7-3.11): Shanghai Composite Index fell 4.00%, Shenzhen Component Index fell 4.40% and gem index fell 3.03%. The A-share environmental protection sector index fell 4.54%, and the rise and fall of solid waste treatment, sanitation, environmental monitoring, water affairs and water treatment were – 6.65%, – 8.28%, – 4.75% and – 2.25% respectively. The H-share environmental protection sector index fell 1.48%. At present, the TTM valuation of A-share environmental protection sector is 17 times.
Industry highlights: the Shanghai Municipal Bureau of ecological environment issued a notice on printing and distributing the “14th five year plan” for the prevention and control of soil and groundwater pollution in Shanghai, proposing the goal that by 2025, the overall environmental quality of soil and groundwater will remain stable, the safe utilization of contaminated cultivated land and key construction land will be consolidated and improved, and the environmental risks of soil and groundwater will be effectively controlled, We will further ensure that citizens can “eat at ease and live at ease”. Specific indicators are:
The safe utilization rate of polluted cultivated land reaches more than 95% (binding); The safe use of key construction land is effectively guaranteed (binding); The environmental quality of groundwater meets the national target (expected).
Investment suggestions:
Environmental protection enterprises outline the second growth curve. High quality environmental protection enterprises have the advantages of good cash flow and fine management. After the main business has entered a relatively mature stage, they begin to look for the second growth curve, such as Zhejiang Weiming Environment Protection Co.Ltd(603568) joining hands with Qingshan group to invest in Indonesia’s high matte nickel project, Shengyuan Environmental Protection Co.Ltd(300867) joining hands with China Three Gorges Renewables (Group) Co.Ltd(600905) to jointly develop offshore wind power in Fujian, which is expected to create the second growth pole for the company’s performance. It is suggested to pay attention to Zhejiang Weiming Environment Protection Co.Ltd(603568) , Shengyuan Environmental Protection Co.Ltd(300867) .
Focus on steady operation environmental protection enterprises and high dividend assets. Operational environmental protection has two characteristics: rigid demand in weak economic cycle and stable return under franchise mode. At present, the leading companies can contribute to the performance growth in the next 2-3 years on the one hand, and are expected to increase the profit space through fine management on the other hand. At the same time, under the background of “stable growth”, the investment value of high dividend assets is expected to be revalued. It is suggested to pay attention to Beijing Geoenviron Engineering & Technology Inc(603588) , Jiangxi Hongcheng Environment Co.Ltd(600461) .
Pay attention to the development opportunities in the field of high prosperity and subdivided environmental protection. Environmental protection subdivisions, such as waste gas treatment in the pan semiconductor field and biodiesel, are boosted by the investment acceleration or recycling trend of relevant industries. It is suggested to pay attention to the relevant high-quality targets in the high boom subdivisions of environmental protection. It is suggested to pay attention to Shanghai Sheng Jian Environment Technology Co.Ltd(603324) .
Risk tips: the implementation risk of environmental protection policies and the progress risk of construction projects.
