Investment in seawater desalination drives growth in the instrumentation industry
During the "12th Five-Year Plan" period, China's seawater desalination capacity is expected to reach 1.5 to 2 million tons per day, three to four times the current capacity, with an investment scale of approximately 20 billion yuan. The outline supports the development of large-scale reverse osmosis and low-temperature multi-effect seawater desalination technology and equipment, encouraging large-scale seawater desalination industrial demonstration projects. High-pressure pumps, high-performance corrosion-resistant steel pipes, and instrument manufacturing enterprises that account for a relatively large proportion of investments will experience explosive growth.
Guo Youzhi, Secretary-General of the China Desalination Association, recently has been in good spirits due to the joint release of the "National Marine Science and Technology Development Plan Outline for the 12th Five-Year Plan" by the State Oceanic Administration, Ministry of Science and Technology, Ministry of Education, and National Natural Science Foundation.
Guo Youzhi told reporters from the Science Times that the outline supports the development of large-scale reverse osmosis and low-temperature multi-effect seawater desalination technology and equipment, encouraging large-scale seawater desalination industrial demonstration projects, which will accelerate the autonomy and scaling of China's seawater desalination industry.
"It can be determined that the seawater desalination industry will soon enter a phase of explosive growth," Guo Youzhi confidently stated.
The investment space is expanding
Currently, China's seawater desalination equipment as a whole relies on foreign products.
Take reverse osmosis membranes as an example. According to information obtained by the Science Times from the China Separation Membrane Industry Association, there are currently about 300 membrane production enterprises and nearly 1,000 membrane engineering companies in China. However, larger ones are mostly foreign-funded or companies cooperating with overseas entities. Domestic membrane enterprises are mostly small and medium-sized enterprises, generally suffering from insufficient funds, fewer product varieties, and unstable quality, undoubtedly affecting the application of membrane technology and the survival and development of enterprises themselves.
Now, with the introduction of various supportive policies, the above issues will soon be improved. Guo Youzhi said that in the future, the localization rate of seawater desalination equipment will undoubtedly increase significantly.
In fact, as the scarcity of freshwater resources becomes increasingly prominent, the state is paying more attention to the utilization of seawater. Currently, the Ministry of Science and Technology is formulating the "12th Five-Year Plan for Seawater Desalination Technology Development." In terms of promoting industrial development, the NDRC, together with 11 ministries, has formulated the "Opinions on Accelerating the Development of the Seawater Desalination Industry," which is expected to be issued under the name of the State Council within the year. Meanwhile, the NDRC will also issue a special plan for the seawater desalination industry during the "12th Five-Year Plan."
According to estimates by the China Desalination Association, during the "12th Five-Year Plan" period, China's seawater desalination capacity will reach 1.5 to 2 million tons per day, three to four times the current capacity, with an investment scale reaching around 20 billion yuan. By 2020, the seawater desalination capacity will reach 2.5 to 3 million tons per day, more than five times the current capacity.
The doubling of capacity also means the expansion of investment space, especially in seawater desalination equipment investment. This will bring development opportunities to relevant equipment manufacturers.
Guo Youzhi believes that national financial support and policy倾斜to key enterprises will promote the combination of membrane enterprises and water treatment engineering companies, beneficial for creating well-known brands domestically and internationally, and beneficial for enterprises to participate in domestic and international competitions.
Listed companies welcome policy benefits
Faced with these policy benefits, the investment community's attention to listed companies in the seawater desalination field is gradually increasing.
Feng Weitong, an industry analyst at Huatai United Securities, introduced the investment strategy in this field in an interview with the Science Times.
"The investment opportunities in the seawater desalination industry mainly come from the reverse osmosis method, which has the largest market share, the best technology, and the most promising development prospects," Feng Weitong said. In the reverse osmosis field, Feng Weitong mainly looks favorably upon three types of enterprises: first choice being enterprises producing core equipment for seawater desalination - reverse osmosis membranes; second choice being enterprises producing high-pressure pumps, high-performance corrosion-resistant steel pipes, and instruments that account for a relatively large proportion of investments. Additionally, there are chemical agents such as chlorine and alkali used in water treatment.
Founder Securities published a research report stating that future investments in seawater desalination equipment will mainly be distributed among high-pressure pumps, corrosion-resistant copper pipes, instruments, and membrane components.
Among the listed companies in related fields, multiple securities institutions look favorably upon Nantong Southern, Shuangliang Energy Saving, and Hailiang Shares.
Hailiang Shares is the leading enterprise in seawater desalination copper pipes. Since seawater contains a large amount of corrosive substances, the pipelines used to treat seawater must possess strong corrosion resistance. Hailiang Shares, which has the capability to produce such corrosion-resistant copper pipes, is thus seen as having a bright prospect.
It is understood that the company's current production capacity has reached 30,000 tons per year, with high processing fees and gross profits. Hailiang Shares' performance report shows that in 2010, Hailiang Shares achieved a net profit of 226 million yuan, growing by 29%.
"Hailiang Shares' performance is good, and after the introduction of national support policies, Hailiang Shares' valuation will improve," said Deng Xinrong, an analyst at Founder Securities, in an interview with the Science Times.
Nantong Southern is the leader in the reverse osmosis membrane market. Beijing Times Waterdon, a subsidiary controlled 42% by Nantong Southern, is the largest specialized producer of composite reverse osmosis membranes in China. It currently has a reverse osmosis membrane production capacity of 3 million square meters, with an annual output exceeding 2.8 million square meters, occupying 4% to 5% of the market share and supplying 50% of domestic enterprises.
The company's interim report this year shows that the revenue from composite reverse osmosis membranes increased by 65% in the first half of the year, with a gross profit margin as high as 40%, accounting for 13% of the company's revenue and 26% of the company's gross profit, becoming a new profit growth point for the company.
In addition, Shuangliang Energy Saving, which produces low-temperature multi-effect seawater desalination equipment, is also widely favored by brokers. It is understood that last year, Shuangliang Energy Saving issued nearly 5 billion yuan worth of convertible bonds to engage in the production of low-temperature multi-effect seawater desalination equipment. After the full-scale production of the project, it can produce 9 sets of low-temperature multi-effect LT-MED/12,000-ton seawater desalination equipment annually. The "25,000-ton/day large-scale low-temperature multi-effect distillation seawater desalination pilot plant" developed by the company passed expert review this year. Huatai United Securities expects its seawater desalination equipment gross profit margin to reach 30%, with a net profit margin exceeding 10%.
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