“13th 5-year plan” to reinforce ecological civilization construction

Growth rate of environmental protection industry likely to exceed 20 pct during “13th 5-year plan”

The fifth plenary session of the 18th Central Committee of the Communist Party of China will be held on Oct. 26 to 29 in Beijing, with formulation of “13th 5-year plan” as its core agenda. The plan has not been issued yet, but all sectors of society are looking forward to it. As one of the development targets for “13th 5-year plan”, ecological civilization construction attracts wide attention.

 “13th 5-year plan” for environmental protection and ten measures for land pollution prevention and control are expected to issue, with ten measures already taken for air pollution and ten for water. Industrial insiders expected that input for environmental protection industry will further increase during the “13th 5-year plan” period. Recently, secretary general of International Energy Conservation Environmental Protection Association (IEEPA), Li Junyang, pointed out that annual growth rate of environmental protection industry is likely to exceed 20 percent during “13th 5-year plan”. The industrial input is expected to increase to 2 trillion yuan annually during “13th 5-year plan” period according to measurement and calculation of Chinese Academy for Environmental Planning (CAEP). Total social investment in environmental protection is likely to exceed 17 trillion yuan in that period.

Zhao Hualin, director of CAEP financial department, also indicated that under continuous depth of prevention and control for atmosphere, water and land, and promotion of new pattern PPP, environmental protection market gains a huge potential during “13th 5-year plan” period, with a total social investment likely to reach 17 trillion yuan.

Essence International Financial Holdings Limited pointed out that formulation of “13th 5-year plan” currently enters into a speed-up stage; environmental protection sector will be the most deterministic one in five years, based on current urban environmental status in China and government’s close attention to this industry. The industrial direction and investment priority in five years will rise to a national strategic level, becoming a key point of the government’s investment fields.

Price mechanism reform of environmental protection to speed up

Investment for environmental protection is likely to exceed 17 trillion yuan during “13th 5-year plan” period, bringing huge investment opportunities for the market. Meanwhile, related price mechanism reform speeds up, and even injects powerful development force for the industry, which will be a growth point for new round of economic development. According to Guotai Junan Securities Co., Ltd. (601211.SH), China’s environmental protection investment grows annually, measures to reduce pollutant emission gain preliminary achievements, but emission reduction rate is far less than investment growth rate, therefore, it is still a long way for environmental protection. It is the only way for China to reinforce investment strength and treat the pollution in key fields.

Media reported that three ministries jointly issued a circular at the beginning of 2015, which explicitly stipulated that charges on municipal sanitary sewage treatment for prefecture cities should in principle be adjusted to no less than 0.95yuan per ton by the end of 2016. However, the average charge on sanitary sewage treatment in 36 large and medium-sized cities nationwide is only 0.85 per ton, and charges on sanitary sewage treatment for most cities are far below 0.95yuan per ton. In a word, sewage treatment fee ruled low.

“As there’s no environmental protection tax in place, on the one hand, functions of tax in regulating and controlling pollutions and acts damaging environment are restricted; on the other hand, sources of tax income specialized in environmental protection become fewer. Therefore, it’s imperative to start collecting environmental protection tax”, said Professor Tan Yunming from Central University of Finance and Economics.

Select environmental stocks through four mainlines

Insiders told the journalist that investors could select environmental protection industries through four main lines: first, low emission and sustainable energies, such as gas and nuclear energy; second, clean renewable energies, such as wind energy, solar energy, biomass energy, etc.; third, large-scale applications originated from clean energy, and energy-control sectors; four, new energy automobile industry, which has already accumulated technologies.

Guotai Junan Securities Co.,ltd.(601211.SH) pointed out that, as investment on environment protection in China increased year by year, the effect of pollutant emission reduction begin to appear. But the rate of emission reduction is far below investment growth rate, there’s still a long way to go. To increase investment and put greater effort in the management of key pollution sectors is inevitable. Environment sector will benefit as a whole with investment increased. Stocks previously with overweight recommendation and reflecting environmental protection experience in various regions remains preferred, such as Beijing Originwater Technology Co.,ltd.(300070.SZ), Beijing SDL Technology Co.,Ltd.(002658.SZ), Beijing SPC Environment Protection Tech Co.,Ltd.(002573.SZ), Guangdong Chant Group Inc.(002616.SZ), Anhui Shengyun Environment-Protection Group Co.,Ltd.(300090.SZ), Tianjin Motimo Membrane Technology Co.,ltd.(300334.SZ), Xi'an Qiyuan Mechanical and Electrical Equipment Co.,Ltd.(300140.SZ), Zhongshan Public Utilities Group Co.,Ltd.(000685.SZ), Focused Photonics (Hangzhou), Inc.(300203), Fujian Longking Co.,Ltd.(600388.SH), Shenwu Environmental Technology Co.,ltd.(300156.SZ), Beijing GeoEnviron Engineering & Technology,Inc.(603588.SH), Guangxi Bossco Environmental Protection Technology Co.,Ltd.(300422.SZ), Sichuan Scimee Sci.& Tech.Co.,Ltd.(300425.SZ), Yonker Environmental Protection Co.,ltd.(300187.SZ), Sichuan Changhong Electric Co.,Ltd.(600389.SH). Analysis says that with policy prop-up, soil restoration business is expected to gain dramatic growth.

Yonker Environmental Protection’s announcement on the latest results shows net profit for the first three quarters attributed to shareholders of the company ranges from 72,981,600 yuan to 82,398,600 yuan, up 55 percent to 75 percent compared with the corresponding period last year; among which, net profit for Q3 attributed to shareholders of the company ranges from 45,352,700 yuan to 48,592,200 yuan, up 180 percent to 200 percent compared with the corresponding period last year.