Environmental protection industry is one of the industries whose prosperity is closely connected with governmental policies.
As it is shown in the just-concluded disclosure of the third quarterly report, the profit data of the environmental protection sector varies. Some companies see decreasing profit due to reduction of industrial supporting policies. However, the environmental protection industry will gain great policy support on the whole in next years. Latest measurement from the Chinese Academy for Environmental Planning shows that the input in environmental protection will reach up to above 2 trillion yuan annually during the period of the thirteenth five-year plan and the figure will grow by 20 percent annually. By then, the total social input in environmental protection might reach 17 trillion yuan, far exceeding the 4-5 trillion yuan planned in the planning for twelfth five-year plan.
As to the performance of the environmental protection sector in the third quarter, 38 of the 48 listed companies in this sector see different degree of growth, accounting for 78 percent; 8 of the 48 listed companies see their performance growth recording 100 percent, accounting for 16 percent.
To be more specific, Guangxi Bossco Environmental Protection Technology Co., Ltd. (300422.SZ) realizes a net profit of 25,318,400 yuan in the first three quarters of this year, indicating a year-on-year growth of 689.18 percent. The company’s business in the end-of-pipe treatment of water pollution takes up 93.62 percent of its income from main business, representing a year-on-year growth of 613.37 percent. The company’s third quarterly report shows that Bossco Environmental Protection Technology newly contracted projects of 391 million yuan in the third quarter. As of the end of this report period, the amount of signed contracts totals 825 million yuan with 13 projects seeing their contracted amount exceeding 10 million yuan. Shenwu Environmental Technology Co., Ltd. (300156.SZ) achieves outstanding performance and meanwhile launches industrial expansion. The company announced at the beginning of this year that it planned to acquire 100 percent equities of Beijing Huafu Shenwu Industrial Furnace Co., Ltd. (HSIF). HSIF is under the control of Wu Daohong, who is also the actual controller of Shenwu Environmental Technology.
Surely, there are also companies engaged in environmental protection see decreasing performance. Companies including Xi'an Qiyuan Mechanical and Electrical Equipment Co., Ltd. (300140.SZ) and Heilongjiang Interchina Water Treatment Co., Ltd. (600187.SH) see the largest drop in performance. As to this, analyst from Guotai Junan Securities Co., Ltd. (601211.SH) indicates that since the financing demand of the environmental protection sector keeps expanding and the financial cost keeps increasing, some companies might have their revenue and net profit directly impacted due to fierce market competition. Some enterprises experiencing transformation might see unsatisfied progress. Besides, the fiscal policies distributed by the Ministry of Finance and the State Administration of Taxation increase the value-added tax in areas including sewage treatment, resulting in unfavorable impact to companies principally engaged in water treatment.
Taking Interchina Water Treatment as an example, its operating revenue for the first three quarters was 348 million yuan, down 18.30 percent year on year; its net loss dropped 128.64 percent to 21,629,600 yuan from 75,521,000 yuan over the same period last year. The company explained that this was because that the government scrapped the value-added tax exemption for waste water treatment since July 1 and rebated 70 percent taxation to taxpayers, and the profit decline was a result of fierce competitions in the engineering industry and rapidly growing costs in materials. For this reason, the company’s annual performance forecast was rather gloomy: its net profit will decrease sharply, as it says.
An analyst at Changjiang Securities said, “For the growing environmental protection industry, performance fluctuations will not impact its upward trend as more policies are introduced and the industry advances in a positive direction.”
Some analysts indicate that the high level’s resolution to control environment pollution is obvious in the13th Five-Year Plan. A vertical management system for the surveillance, monitoring and law enforcement in environmental protection institutions under provincial level will effectively break down the constraints in the functions and powers of each level environmental watchdog. In addition, in-depth investment in all subsectors of environmental protection is carrying on systematically. We may predict that as the targeted policies, such as the action plan on air and water pollution prevention and sponge cities, have been introduced, the environmental protection industry which has just started will see a stable and efficient development in its internal mechanism and operation pattern.
Translated by Jennifer Lu and Coral Zhong
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