Hong Kong Stock Concept Tracking | “Water Tax Reform Pilot Implementation Measures” Released and Water Sector Beneficial Debt Implementation (with concept stocks)

The Zhitong Finance App learned that recently, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Water Resources jointly issued the “Water Tax Reform Pilot Implementation Measures”. Among them, it was mentioned that the water tax is levied on an ad valorem basis. The amount of tax on groundwater intake is determined from a higher level. For the same type of water used, the groundwater tax amount should be higher than surface water. Higher taxes are determined for water intake in areas where water resources are severely scarce and overloaded. Tax amounts are raised appropriately in line with actual use of water without approval, where the amount of water intake exceeds the permitted amount of water or the water intake plan.

Many cities such as Shanghai/Guangzhou/Changsha/Nanjing have initiated tap water price adjustments. The price adjustment range is 13% to 36%, and the policy side is also actively promoting the reform of charging mechanisms such as sewage and garbage disposal fees. The rationalization of price mechanisms and user payments will be the general trend.

Some domestic agencies pointed out that the water and solid waste industry is dominated by government customers. According to agency estimates, the national sewage treatment service fee financial burden ratio is 71%, and the industry guarantees profit levels through cyclical price adjustments. Improving financial solvency is conducive to improving cash flow and boosting the sustainability of corporate profits.

Guotai Junan also believes that accounts receivable from environmentally friendly water solid waste management companies are expected to be recovered at an accelerated pace.

Shen Wan Hongyuan pointed out that the environmental sector's accounts receivable arrears are large, putting some pressure on the sector's cash flow and profits, and suppressing sector valuations. The bank pointed out that its main environmental protection customers are local governments, and there have been accounts arrears of varying degrees in history. This time, the Ministry of Finance has stepped up efforts to reduce debt, and combined with the central bank's creation of an initial 500 billion yuan swap facility, the environmental protection sector's valuation is expected to increase.

Leading water-related companies:

Beikong Water Group (00371), China Water (00855), Everbright Environment (00257), etc.