发帖
雷达卡
China Water Utilities
INITIATION
Improving fluid dynamics
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We are expanding our water value chain coverage to include solid
waste, in addition to our current coverage of water, waste water
treatment, water recycling and seawater desalination. Here, we initiate
coverage of Guangdong Investment and China Everbright International.
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Driven largely by the Chinese government’s initiatives on
environmental protection, evident in the 11th Five Year Plan and
China’s stimulus plan, we remain bullish on opportunities within
China’s overall environmental value chain. From 2007’s environmental
protection investment of Rmb338.7 bn (1.29% of China’s GDP), we
estimate a potential CAGR of 14% based on the government target of
1.35% of GDP in 2010. While some progress has been made towards its
set targets, the potential upside remains enormous.
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Looking ahead, we expect investment momentum in the environmental
value chain to continue. To capitalise on the macro opportunities, we
believe well-positioned companies with a good project track record
and the ability to offer expertise in the environmental value chain will
benefit. Most importantly, companies with accessibility to funding are
vital as this would affect their ability to ramp-up and bid for projects.
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In addition to our current coverage, we initiate coverage of GDI with a
HK$4.15 target price (potential upside of 24%) and of CEI, with a
HK$1.96 target price (potential upside of 27%) – both with an
OUTPERFORM rating. In our view, GDI provides an inherent defensive
raw water supply exposure while CEI offers a growing exposure to the
solid waste market. Our top picks in the sector are GDI, CEI and Hyflux.
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