Policy Helps Water Pipes Companies Expect to Meet Orders Peak

Abstract: Water conservancy pipes mainly consist of concrete pipes (PCCP pipes, etc.) and plastic pipes (PE pipes, PVC pipes, etc.). Water conservancy pipes are widely used because they have the energy-saving effect of reducing water leakage in water conservancy applications. Inter-basin diversion, urban water supply and drainage, agricultural irrigation and other water conservancy projects.

Since the central government's “No. 1 Document” proposed “4 trillion” water conservancy investment in 2011, related water conservancy investment projects have gradually entered the phase of project establishment, research and financing. Calculated according to the normal water conservancy project investment cycle, the water conservancy infrastructure construction will enter the large-scale construction phase in the second half of 2012, and the water conservancy pipe industry is expected to usher in a round of orders.

At the same time, from our micro-study, the volume of orders for water conservancy pipes has increased significantly over the past year, which confirms from the side that orders are expected to grow rapidly this year.

In addition, the history of domestic water conservancy investment accounts for serious debts, and this round of “4 trillion” investment in water conservancy will hopefully accelerate the construction of water conservancy facilities. The South-to-North Water Diversion Project and other trans-basin diversion projects will be accelerated. Rapid urbanization will bring about the construction of a large-scale urban water supply and drainage network, and agricultural water-saving irrigation will also be widely promoted.

According to our estimation, the annual growth rate of sales revenue of listed water conservancy pipe companies in the past 4 years is about 23%. In the future, as the “4 trillion” water investment order effect gradually emerges, the industry demand growth is expected to accelerate, and it is expected that water pipes will be used in the next five years. Demand is expected to maintain a growth rate of more than 30%.

Investment suggestion: With the implementation of the “4 trillion” water conservancy investment, coupled with the apparent drop in the prices of raw materials such as cement and steel, we believe that the gross profit margin of the water conservancy pipe industry is expected to show a pick-up trend.