Across The BorderOpportunity knocks in China’s waste processing industry

As delegates of the National People’s Congress deliberate the 2016-2020 five-year plan for various industries in Beijing this month, the environmental protection sector will likely garner special attention.

Investors will be watching for possible clues from the parliamentary meeting on Beijing’s next initiative on cleaning up the environment in terms of planned spending and project scale, which will affect the pace of development of the sector supported by subsidies and preferential tax treatments.

One of the major players in the industry is Hong Kong-listed China Everbright International (CEI), one of China’s largest builders and operators of waste-to-electricity projects. The firm, 41.4 per cent owned by finance-to-property conglomerate China Everbright Group, also operates waste water treatment, hazardous waste and renewable projects.

It has been a fund managers’ favourite because of its buoyant share price, which has risen four-fold in four years. Recently however, the share has been under pressure, plummeting 45 per cent since April last year, amid the wider stock market rout and investors’ concerns its project execution time may be lengthened after Beijing tightened the emission standards for waste-to-energy plants.

Some analysts said they believe the price correction has been excessive.

“[Based on] CEI’s steady ramp-up in projects late last year and our on the ground research, we believe CEI remains strong in waste-to-energy projects execution and investors are unduly concerned about its operations,” said Daiwa Capital Markets head of utilities and renewables research Dennis Ip in a report late last month.