The economic situation has stabilized and the investment environment has picked up. Against this backdrop, how to make environmental protection investment? This paper hereby conducts simple analysis of macroeconomic policies, market trends and enterprise dynamics, with a view to helping the majority of environmental protection investors to gain keen insights.
Throughout the year of 2018, due to some adverse factors (such as the deterioration of the financing environment, the growth slowdown in the industry performance and the risk of equity pledge), environmental protection industry underperformed with a sharp decline. Despite four rebounds, this was helplessly beyond the reach.
From the national perspective, since 2019, good news will be still available for environmental protection. Law for Soil Pollution Prevention and Control has come into force since January 1, 2019. The second round of environmental protection inspection by the Central Government will be launched. New version of Measures for Public Participation in Environmental Impact Assessment will be put into force. Provincial environmental protection will undergo the reform.
In addition, an article, published by Minister of Ecology and Environment Li Ganjie, expressly emphasizes that in 2019, environmental protection authorities will fulfill major task, i.e., winning the victory in seven milestone battles for pollution prevention and control. It is reported that the upcoming National Eco-Environment Work Conference will also make overall plan for the nationwide environmental protection work for the year of 2019.
From the perspective of market, the environmental protection industry will still enjoy rosy prospects. The environmental protection industry is capital-intensive. Affected by credit, the net profit of water treatment industry and gardening industry will decline. However, enterprises engaged in solid waste and environmental monitoring will witness steady increase in net profit. It can be seen that industry performance is constantly diverging and differentiating rather than poor performance of the environmental protection industry.
A series of factors, such as the progress in urbanization, the advent of “strong supervision” for environmental protection, the easing of monetary and credit policies, the expansion of leading enterprises and the shift from deleveraging to leverage stabilization, will be such catalysts that cannot be underestimated.
From the perspective of investment, it is necessary to firstly take into account “cash flow”. The environmental protection enterprises, characterized by favorable cash flow situation, relatively stable performance growth, advantages of financing cost, high-quality operating assets and core technologies, will benefit most from new round of development. Such enterprises boast high defensiveness and imply great configuration value.