Key investment points
Key recommendations include: Beijing Geoenviron Engineering & Technology Inc(603588) \ , Grandblue Environment Co.Ltd(600323) , China water, Yutong Heavy Industries Co.Ltd(600817) , Henan Bccy Environmental Energy Co.Ltd(300614) , fulongma, China Resourcesand Environment Co.Ltd(600217) .
It is suggested to pay attention to: Jiangxi Jovo Energy Co.Ltd(605090) , Suzhou Jinhong Gas Co.Ltd(688106) , Wangneng Environment Co.Ltd(002034) , Chongqing Sanfeng Environment Group Corp.Ltd(601827) , conch entrepreneurship.
The implementation scope of EU carbon tariff has been expanded & ahead of time, and the value of clean energy & renewable resources has been highlighted.
In May 2022, the Environmental Committee (envi) of the European Parliament passed the carbon tariff bill; The plan is more radical and will be voted on in June 2022. Carbon tariff legislation is imminent. Three major changes in the scheme: 1) advance of time: the transition period is reduced to 2 years and officially starts in 2025; The full implementation time of all departments of ETS is proposed to 2030, five years earlier than the proposal of the European Commission. 2) Scope expansion: ① applicable industries are expanded and organic chemicals, plastics and hydrogen are added. ② The collection boundary is expanded, and the CBAM accounting scope is extended to include indirect emissions, that is, the emission of purchased power. 3) Mechanism improvement: ① maintain the consistency between eu-ets and CBAM. The free quota during the transition period is 100%. It will decline in 2025 and 0% in 2030, five years ahead of the European Commission plan. ② Establish a unified management organization. ③ The proceeds are used to assist the least developed countries in their low-carbon transformation. Carbon tariffs drive trading countries to save energy and reduce carbon in the production process, and the value of clean energy & renewable resources is prominent. CBAM will build a carbon price linkage mechanism to accelerate the integration of China's carbon market with the world.
The valuation of the environmental protection sector is at a historical low, and the stable growth policy of infrastructure & financing tools are expected to drive the valuation upward. CITIC environmental protection and utility index PE (TTM) is 25.35 times (2022 / 5 / 20), with a historical average of 39.72 times and a median of 36.05 times in recent ten years. The current valuation is very attractive.
The steady growth of infrastructure and the support of REITs financing tools are expected to drive the environmental protection sector and the valuation back to the upward track. Traditional infrastructure focuses on Water Affairs & solid waste steady growth: 1) water affairs: recommend [ Jiangxi Hongcheng Environment Co.Ltd(600461) ] comprehensive public utility platform, and promise that the cash dividend ratio in 20222023 will be ≥ 50% and the dividend rate will be 6.19% (2022 / 5 / 20), with a margin of safety; [China water]. 2) Waste incineration: it is recommended that [Everbright environment] stock subsidies be cashed and superimposed on its own development cycle, cash flow is improved to welcome the return of value, and the dividend rate is 7.13% (2022 / 5 / 20); Dynagreen Environmental Protection Group Co.Ltd(601330) Grandblue Environment Co.Ltd(600323) 。 3) The value of gas pipeline is prominent, so it is recommended to pay attention to [ Top Resource Conservation & Environment Corp(300332) ]. [ new energy & renewable resources] ; Power battery recovery [ Miracle Automation Engineering Co.Ltd(002009) ]; Recycled plastics [ Beijing Sanlian Hope Shin-Gosentechnical Service Co.Ltd(300384) ] [ Shandong Intco Recycling Resources Co.Ltd(688087) ]; Distiller's grains recycling [ Road Environment Technology Co.Ltd(688156) ] the actual controller issued 110 million additional shares. 2) Hydrogen energy: it is suggested to pay attention to upstream hydrogen production [ Jiangxi Jovo Energy Co.Ltd(605090) ]; 3) New energy: recommended solid waste + new lithium battery materials [ Zhejiang Weiming Environment Protection Co.Ltd(603568) ].
Carbon neutral builds the investment framework of environmental protection industry from the front end, middle end and back end, and is bullish on the long-term rise of EU carbon price and CCER in the short term. 1) Front end energy substitution: adjust the energy structure, pay attention to sanitation new energy equipment and renewable energy substitution. 2) Middle end energy conservation and emission reduction: promote industrial transformation and pay attention to energy conservation management & Application of emission reduction equipment. 3) Back end recycling: promote waste classification, hazardous waste and other renewable resources reuse. 4) Carbon trading: encourage the development of CCER projects such as renewable energy, methane utilization and forestry carbon sequestration.
The development of China's carbon market is similar to that of the European Union. It already has the prototype of total amount control & market regulation mechanism. At present, the transaction scale and covering industries have large room for improvement, and the carbon price is far lower than overseas. The tightening of total amount drives the carbon price to rise for a long time. The approval of CCER demand release is expected to restart. We expect the scarcity price of CCER to rise in the near future.
Steady growth + new tools + new fields. Comprehensively recommend low-carbon environmental protection assets: 1) environmental asset value + Growth Logic 2.0: a) steady growth + new tools + new fields. Policy +: double carbon, strengthening infrastructure investment; Mode +: REITs returns increase; Space +: the second growth curve. B) The value of cash flow driven by marketization is further highlighted: CCER green power, waste incineration bidding and marketization of water price enhance the certainty of return and improve cash flow. 2) Under the new logic, the valuation anchor has been significantly improved: undervalued + low position + growth, improved model and cash flow, and improved valuation. 3) Suggestions: a) steady growth / high dividend / REITs:
Water + pipe network [ Jiangxi Hongcheng Environment Co.Ltd(600461) ], waste incineration [ Dynagreen Environmental Protection Group Co.Ltd(601330) ], water supply price increase + direct drinking water [China water]. B) New track: renewable resources: the most economical carbon premium + price increase of resource products: hazardous waste recycling [ Beijing Geoenviron Engineering & Technology Inc(603588) ], battery recycling [ Miracle Automation Engineering Co.Ltd(002009) ], recycled plastics [ Beijing Sanlian Hope Shin-Gosentechnical Service Co.Ltd(300384) ] [ Shandong Intco Recycling Resources Co.Ltd(688087) ], wine tank recycling [ Road Environment Technology Co.Ltd(688156) ]; High matte: [ Zhejiang Weiming Environment Protection Co.Ltd(603568) ]; Hydrogen energy: [ Jiangxi Jovo Energy Co.Ltd(605090) ].
Latest research: China Tianying Inc(000035) : join hands with the Three Gorges & State Grid to complement each other's advantages, accelerate the implementation of gravity energy storage projects and take the lead in the market Road Environment Technology Co.Ltd(688156) : it is planned to issue 110 million yuan to the actual controller, and the biological feed will receive policy support again; Hydrogen energy series research II: economic calculation and cost reduction prospect of industrial chain.
Risk tip: the policy promotion is less than expected, the interest rate rises more than expected, and the fiscal expenditure is lower than expected
