The 11th meeting of the central financial and Economic Commission focused on carbon reduction and infrastructure construction, focusing on transportation / water conservancy / energy / environmental governance, and improving the strategic position of ecological and environmental protection. 1) In March 2021, the ninth meeting of the central financial and Economic Commission emphasized carbon peaking and carbon neutralization. It is proposed to take green and low-carbon development of energy as the key to accelerate the formation of industrial structure, production mode, lifestyle and spatial pattern of saving resources and protecting the environment. 2) In August 2021, the 10th meeting of the central financial and Economic Commission proposed to strengthen the construction of rural infrastructure and public service system and improve the rural living environment. 3) The 11th meeting of the central financial and Economic Commission in April 2022 stressed that infrastructure is an important support for economic and social development, put forward requirements for accelerating carbon reduction and infrastructure construction, and enhance the strategic position of ecological and environmental protection. ① In terms of carbon reduction, it is proposed to develop distributed smart grid in the energy field, build a number of new green and low-carbon energy bases, and accelerate the improvement of oil and gas pipeline network. ② In terms of ecological and environmental protection, the construction requirements of environmental governance capacity are put forward for cities and rural areas: cities should strengthen the construction of urban flood control and drainage, sewage and garbage collection and treatment system; Rural areas should strengthen the construction of rural sewage and garbage collection and treatment facilities. 4) In 2022, the issuance of special bonds will be advanced, the proportion of ecological and environmental protection will increase, and the strategic position will be highlighted. 2022m1-2 ecological and environmental protection expenditure accounted for 4.16% of the special debt, an increase of 0.22pct compared with 3.94% in 2021.
The re infrastructure expansion rules are in the furnace. On April 15, 2022, the Shanghai and Shenzhen stock exchanges solicited public opinions on the business guidelines for newly purchased infrastructure projects of public REITs. The draft clarifies the specific arrangements for newly purchased infrastructure projects of public REITs and related raising, information disclosure, decision-making and approval. In principle, the types of items purchased for raising are basically the same as the current holding types. In principle, the issuance time is 12 months after the original REIT has been operated, and the operation is stable and in good condition. The implementation process of raising is relatively simplified compared with the initial issuance.
Macro level: REITs raising helps to form a virtuous circle of investment and financing and help stabilize economic growth. As of April 27, 2022, the issuance scale of 12 REITs in Shanghai and Shenzhen totaled 45.8 billion yuan. In recent years, the annual raising scale of American REITs has reached US $30-50 billion, accounting for about 30% ~ 50% of the total annual market financing, which is the main way to increase the scale of REITs. The introduction of China’s raising rules will improve the market system, help listed high-quality operators to acquire assets by issuing additional shares based on the market mechanism, better form a virtuous circle of investment and financing, and help achieve the goal of stable economic growth at the macro level.
Micro level: in the field of environmental protection, water and solid waste assets are given priority, and the value of high-quality operating assets is subject to revaluation. The first batch of listed Wells Fargo’s first water REIT and AVIC Shougang biomass REIT’s underlying assets are water and solid waste projects respectively. The raising requires that the newly purchased projects are consistent with the original types, and the water and solid waste projects are expected to benefit first. 1) accelerate the asset turnover rate & promote the investment of new projects: putting the project into REITs is conducive to the original equity side to revitalize the stock assets and accelerate the investment and acquisition of new projects; 2) The operating assets with high dividend and high growth welcome the revaluation of value: since its establishment, the growth rates of Fuguo capital REIT and AVIC Shougang biomass REIT have been 50% and 26% respectively, and the premium rates have been 49% and 42% respectively. The favor of funds shows the recognition of high-quality operating assets and cash flow value. From the perspective of Pb, the Pb valuation of the water REITs project is 1.49, which is 23% higher than the Pb valuation of the original operator Beijing Capital Eco-Environment Protection Group Co.Ltd(600008) of 1.21%. From the perspective of market price / dividend, the valuation level of the distributed cash flow of the water project is 2.3 times that of Beijing Capital Eco-Environment Protection Group Co.Ltd(600008) . With the raising of REITs, it will drive the revaluation of high-quality operating assets with high dividend and growth in the industry, and then boost the valuation of the sector.
Investment suggestions: steady growth of infrastructure + support of REITs tools, traditional infrastructure focuses on water & steady growth of solid waste: 1) water: recommend [ Jiangxi Hongcheng Environment Co.Ltd(600461) ] comprehensive public utility platform, and promise that the cash dividend ratio in 20222023 will be ≥ 50%, the dividend rate will be 6.6%, with a margin of safety; [China water], it is suggested to pay attention to [ Beijing Capital Eco-Environment Protection Group Co.Ltd(600008) ]. 2) Waste incineration: it is recommended that [Everbright environment] stock subsidies be cashed and superimposed on its own development cycle, the cash flow is improved to welcome the return of value, and the dividend rate is 7.6%; Dynagreen Environmental Protection Group Co.Ltd(601330) 。 3) The value of gas pipeline is prominent, so it is recommended to pay attention to [ Top Resource Conservation & Environment Corp(300332) ]. New infrastructure construction focuses on renewable resources & Hydrogen Energy & New Energy: 1) renewable resources: recommend hazardous waste recycling [ Beijing Geoenviron Engineering & Technology Inc(603588) ]; Power battery recovery [ Miracle Automation Engineering Co.Ltd(002009) ]; Recycled plastics [ Beijing Sanlian Hope Shin-Gosentechnical Service Co.Ltd(300384) ]; Recycling of distiller’s grains [ Road Environment Technology Co.Ltd(688156) ]. 2) Hydrogen energy: it is suggested to pay attention to upstream hydrogen production [ Jiangxi Jovo Energy Co.Ltd(605090) ]; 3) New energy: recommend solid waste + new lithium battery materials [ Zhejiang Weiming Environment Protection Co.Ltd(603568) ]; It is suggested to pay attention to atmospheric governance + green power [ Fujian Longking Co.Ltd(600388) ].
Risk tip: the policy progress is less than expected, the project construction is less than expected, and the raising application is less than expected
