Recently, Qianjiang Water Conservancy (600283) has received approval from the China Securities Regulatory Commission (CSRC) to register for refinancing, agreeing to the company's issuance of shares to no more than 35 compliant specific investors, including the controlling shareholder China Water Investment Group Co., Ltd. (referred to as: China Water). The company's non-public issuance aims to raise funds of 581 million yuan, and the net proceeds from the fundraising will be entirely used for the construction of seven water plants and sewage treatment plants. At present, the company's non-public issuance is being carried out in an orderly manner according to plan.
The refinancing project was approved in 277 days, setting the fastest record for A-share companies this year.
According to statistics, the approval time for Qianjiang Water Conservancy's non-public issuance has set the fastest record in the A-share market since the new refinancing policy. Wind data shows that among the 14 Shanghai and Shenzhen companies that obtained additional issuance approval (including the issuance of shares to purchase assets and raise supporting funds) in 2024 (as of October 14), from the announcement of the refinancing plan on December 23, 2023, to the announcement of obtaining approval on September 25, 2024, Qianjiang Water Conservancy only took 277 days.
Advertisement
In August 2023, the CSRC issued the "CSRC coordinates the balance between primary and secondary markets and optimizes IPO and refinancing regulatory arrangements," which clarified the overall requirements for current refinancing supervision. In early November of the same year, the Shanghai and Shenzhen stock exchanges issued new refinancing rules, setting "five red lines" for the review of refinancing projects, making stricter and tighter arrangements for the pace and scale of refinancing by listed companies, focusing on supporting the excellent and restricting the inferior, and guiding resources to gather towards high-quality listed companies. Entering 2024, with the continuous implementation of new policies such as the "Nine National Articles" and the "Six Mergers and Acquisitions Articles," the efficiency of the capital market and the ability to allocate resources have been further improved, promoting the continuous high-quality development of listed companies.
Analysis points out that the rapid approval of Qianjiang Water Conservancy's refinancing to some extent reflects the regulatory authorities' high recognition of the company and the refinancing investment matters. From the company's fundamentals, Qianjiang Water Conservancy has maintained good revenue and profit growth in recent years, and the quality of operations has steadily improved; from the perspective of investment projects, the investment projects are all new construction and expansion projects of water plants and sewage plants, which are expected to increase the company's water supply and sewage treatment scale by a total of 440,000 cubic meters/day, helping the company's main business to improve quality and efficiency, and further do a good job in "three concentrations."
Performance continues to grow, accelerating development to seize the opportunity of the industry's quantity and price rise.
Qianjiang Water Conservancy mainly engages in the production and supply of tap water, while also operating sewage treatment and municipal tap water pipeline installation businesses, covering the entire water industry chain including raw water, water production, sewage and sludge disposal, and seawater desalination. The company has a complete industrial chain and enjoys the advantages of integrated plant and network, and integrated supply and drainage.
The company's non-public issuance plan shows that the company plans to use the raised funds of 581 million yuan for the Hu Village (Lishui City) Water Plant Project (Phase I), Daishan County (Zhoushan City) Da Bei Water Plant Project, Lanxi City Dengsheng Water Plant Project, Fuzhou Jiangyin Port City Economic Zone Sewage Treatment Plant Mid-term Engineering Concession Operation Project (Phase I), Changshan (Zhangzhou City) Huaqiao City Sewage Treatment Plant Expansion and Upgrading Engineering Concession Operation Project, Yongkang City Urban Sewage Treatment Plant Expansion (Phase V) Project, and Pinghu City Dushan Port Industrial Water Plant Phase III Project. After the completion of the above projects, it will add a water supply scale of 340,000 cubic meters/day and an additional sewage treatment capacity of 100,000 cubic meters/day. The company's market share and service capabilities in places such as Lishui, Zhoushan, Yongkang, Pinghu, and Lanxi in Zhejiang will be further improved, while also helping to promote the in-depth development of business expansion in the Fujian region. In recent years, Qianjiang Water Conservancy has shown a good growth trend. In 2023, the company achieved a business income of 2.222 billion yuan, a year-on-year increase of 21.16%, and achieved a net profit attributable to the mother company of 206 million yuan, a year-on-year increase of 19.22%. In the first half of 2024, the company achieved a business income of 1.016 billion yuan, a year-on-year increase of 11.39%. Under the good performance, the company's ability to return to investors has continued to improve. From 2021 to 2023, the company's total cash dividend for three years was 176 million yuan, accounting for 100.14% of the average distributable profit for the same period.
From the perspective of the performance drivers of the water industry, in addition to continuously improving operational efficiency, expanding the scale of operations is also an indispensable part for the development of water industry enterprises. Enterprises in the industry need to seize market opportunities, increase investment in development and layout, expand market share, and welcome the policy dividend period of the industry.
In terms of water supply business, after the National Development and Reform Commission, the Ministry of Housing and Urban-Rural Development, and other departments issued the "Urban Water Supply Price Management Method" and the "Urban Water Supply Pricing Cost Audit Method" in 2021, the process of national water price adjustment has been opened, and industry enterprises need to obtain more market share through mergers and acquisitions or new water supply projects. According to the statistics of Zheshang Securities, from January to September 2024, among the 36 key cities in the country, Shanghai, Guangzhou, Changsha, and Nanjing have all carried out or planned water price adjustments, with an increase ranging from 17% to 31%. In other cities, Quanzhou, Yixing, Chuzhou, and other 12 cities and counties have carried out or planned water price adjustments, with an increase in service ranging from 13% to 78%.In the field of sewage business, in January 2022, four ministries including the National Development and Reform Commission issued the "Guiding Opinions on Accelerating the Construction of Urban Environmental Infrastructure," proposing that by 2025, the urban areas will add 20 million cubic meters/day of sewage treatment capacity, add and renovate 80,000 kilometers of sewage collection pipelines, and build, renovate, and expand the production capacity of recycled water by no less than 15 million cubic meters/day. The sewage treatment rate in county towns is expected to reach over 95%. The "Notice on the Action Plan for Deepening the Reform of the Price Mechanism during the 'Fourteenth Five-Year Plan' Period" suggests that, in conjunction with the improvement of sewage treatment discharge standards, the charging standards will be raised to a level that compensates for the cost of sewage treatment and disposal and allows for a reasonable profit, and a dynamic adjustment mechanism will be established. It encourages the determination of sewage treatment service fees through government procurement and market-oriented methods such as bidding.
It is worth noting that in October 2024, the Ministry of Finance indicated its intention to increase the debt limit on a one-time, large scale, to replace the existing implicit debt of local governments, and to intensify efforts to support local debt risk resolution. This is the most significant measure introduced in recent years to support debt resolution. The relevant policies will significantly improve the market's concerns about the rapid growth of receivables, high bad debt losses and financial expenses, and tight working capital faced by environmental protection and water utilities companies. At the same time, it will stimulate the release of new local environmental investment demands, and is expected to achieve a "double play" of improving the quality of existing assets and enhancing future growth potential.
The company stated that through this issuance, it will replenish its own financial reserves, and its financial strength will be further enhanced, which is conducive to strengthening the company's ability to withstand financial risks, optimizing the company's capital structure, and providing a good guarantee for the company's continuous development. The implementation of the investment projects raised by the funds will effectively expand the company's business scale and enhance market competitiveness. The company will be able to seize the opportunities brought by the rapid development of the industry and national policy dividends, and respond to the challenges brought by macroeconomic fluctuations and increasingly fierce competition in the water industry, laying a solid foundation for the company to build a sustainable high-quality development.