The Zhitong Finance App learned that on December 7, in order to promote carbon reduction, pollution reduction, green expansion, and growth to improve air quality; solidly promote the green and low-carbon transformation of industry, energy, and transportation, strengthen surface source pollution control, strengthen source prevention and control, and accelerate the formation of a green and low-carbon production lifestyle, the State Council issued an “Action Plan for Continuous Improvement of Air Quality”. Specifically, this plan covers the three sectors of environmental protection, clean energy, and charging stations to continuously improve air quality and promote high-quality economic development. Related concept stocks: Shouchuang Environment (03989), Yuefeng Environmental (01381), Weilai-SW (09866), Ideal Automobile-W (02015), Xinao Energy (02688), and China Gas (00384).

In terms of environmental protection, the “Plan” proposes that by 2025, the PM2.5 concentration in prefecture-level cities and above nationwide will be reduced by 10% compared to 2020, and the proportion of days with severe pollution and above will be kept within 1%. It is necessary to increase policy support and support the cultivation of a number of leading enterprises in fields such as the production and use of raw and auxiliary materials with low (no) VOCs content, VOCs pollution control, ultra-low emissions, and environmental and atmospheric composition monitoring.

In recent times, there has been constant positive news for China's environmental protection industry. On August 22, 10 departments including the National Development and Reform Commission formulated the “Implementation Plan for the Green and Low-Carbon Advanced Technology Demonstration Project”. It is proposed that by 2025, through the implementation of advanced green and low-carbon technology demonstration projects, the implementation of a number of demonstration projects, and the transformation and application of a number of advanced green and low-carbon technology achievements, a number of support policies, business models and supervisory mechanisms conducive to the promotion and application of green and low-carbon technology will be gradually improved to explore effective paths for carbon reduction in key areas.

Regarding the future market trend of the sector, Guosheng Securities believes that the performance of the environmental sector has been sluggish in the past three years, and valuations, holdings, etc. are still low. The introduction of environmental protection REITs provides new equity financing instruments. The introduction of environmental protection REITs provides new equity financing instruments. Pollution control operations such as urban sewage, garbage disposal, and solid waste treatment are the focus of industries that are driving power, and are optimistic about enterprises with strong technical advantages and high barriers.

Minsheng Securities also said that since 2023, the overall performance of the environmental protection industry has outperformed the market, with the water affairs and water treatment sectors performing well. With the gradual elimination of the impact of public health events, the environmental protection industry as a whole is showing a recovery trend. Excluding the influence of large non-recurring profit and loss factors of individual companies, net profit from net profit increased by 14.1% year-on-year in the first three quarters, further enhancing profitability. It is recommended to focus on the two main lines of dividends and growth.

In terms of charging stations, the “Plan” proposes speeding up the improvement of the level of motor vehicle cleaning. Of the new or upgraded buses, leasing, urban logistics and distribution, and light sanitation vehicles in the public sector in key regions, the proportion of new energy vehicles is not less than 80%. Encourage all regions to actively support public bus and tram charging in new energy cities. Strive to achieve a coverage rate of not less than 80% of fast charging stations in high-speed service areas in key regions and no less than 60% in other regions by 2025.

According to data from the China Charging Union, from January to October 2023, the number of charging infrastructure increased to 2,744 million units, of which the number of public charging stations increased by 728,000, and the number of private charging stations built with vehicles increased by 20170,000, an increase of 29.4% over the previous year. As of October 2023, the cumulative number of charging infrastructure nationwide was 7.954 million units, an increase of 68.9% over the previous year.

Furthermore, according to a statistical analysis by the China Association of Automobile Manufacturers, in October 2023, entering the golden autumn of October, auto shows and promotional activities in many places are in full swing. New models from major car companies continue to be released, and the number of visitors entering stores has increased markedly, further boosting automobile consumption. In October, production and sales of new energy vehicles reached 989,000 units and 956,000 units respectively, with a year-on-year increase of 29.2% and 33.5%, respectively, and a market share of 33.5%.

China Aviation Securities said that the penetration rate of new energy vehicles has continued to rise in recent years, and the rapidly increasing ownership volume has driven a continuous increase in demand for charging piles and other related supporting facilities. The charging pile sector is expected to usher in rapid development.

Analysis by industry insiders indicates that by the end of 2022, the number of new energy vehicles owned in China had reached 13.1 million, the number of charging stations had reached 5.21 million, and the vehicle pile ratio had reached 2. 5:1, a significant improvement over 4:1 in 2017. However, there is still a gap in the development goal of a 1:1 car-pile ratio. By 2030, the number of new energy vehicles owned in China will reach 64.2 million. According to the construction target of a 1:1 vehicle pile ratio, in the next 10 years, there is still a gap of nearly 60 million in charging pile construction in China, which is expected to form a charging pile infrastructure construction market exceeding trillion dollars.

In terms of clean energy, the “Plan” proposes to vigorously develop new energy and clean energy. By 2025, the share of non-fossil energy consumption will reach about 20%, and electricity will account for about 30% of terminal energy consumption. Continue to increase natural gas production and supply, and give priority to adding natural gas to protect residents' living and clean heating needs.

Domestic natural gas consumption has resumed growth this year, and the growth rate of urban gas sales is expected to pick up. According to data from the National Development and Reform Commission, in October 2023, the country's apparent consumption of natural gas was 31.92 billion cubic meters, an increase of 4.5% over the previous year. From January to October, the country's apparent consumption of natural gas was 321.71 billion cubic meters, an increase of 7.1% over the previous year.

Cinda Securities said that in 2022, due to factors such as soaring international gas prices, domestic epidemic prevention and control, and economic weakness, China's apparent consumption of natural gas fell 1.7% year on year. Among them, natural gas consumption in the industrial, power generation, and chemical sectors all declined sharply. Since 2023, against the backdrop of domestic economic recovery and falling international gas prices, apparent consumption of domestic natural gas has shown a good recovery trend. China's natural gas consumption is expected to increase by about 7% year-on-year in 2023, and the growth rate of urban fuel companies' gas sales is expected to rise; looking ahead to 2024, the domestic demand side is expected to improve further, and natural gas consumption is expected to maintain a high growth rate of 6%-7%, driving urban gas sales to maintain a high growth rate.

The agency also pointed out that the supply of upstream gas sources is relatively sufficient, the reform of the downstream natural gas price mechanism is accelerating, and the smooth price situation continues to improve, jointly promoting the increase in gas sales volume of urban fuel companies and the recovery of gas sales price spreads; at the same time, as international gas prices hit a bottom and rise, overseas long-term cooperative resale profits are expected to recover in 2023Q4 and 2024. Overall, we are optimistic about the month-on-month improvement in the profit contribution of resale, as well as the performance growth and valuation recovery of urban fuel companies.

Related concept stocks:

Environmentally friendly:

Pioneer Environment (03989): Company, mainly engaged in providing waste treatment technology and services, focusing on the development, design, system integration, project investment, consulting, operation and maintenance of waste treatment facilities, especially waste-to-energy projects.

Yuefeng Environmental Protection (01381): The company is a leading provider of comprehensive urban environmental and health services, mainly engaged in waste incineration power generation, smart city environmental health and related services.

Charging pile:

Weilai-SW (09866): In July, NIO built 98 power exchange stations (3 overseas), arranged 125 charging stations, and connected to 19681 third-party charging stations. Furthermore, since August 1, NIO has adjusted the price of the Home Charger, with a discount range of 2,000 yuan to 2,700 yuan.

Ideal Automotive-W (02015): According to the plan, by the end of 2023, Ideal Auto aims to complete the construction of more than 300 high-speed supercharging stations, covering 70% of the high-speed mileage of the four major economic belts in Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area, and Cheng-Chongqing. The national high-speed coverage rate is expected to reach 40%. By 2025, the target is to build more than 3,000 charging stations, covering 90% of the country's national highways and major Tier 1, 2, and 3 cities.

Clean energy (natural gas):

Xinao Energy (02688): As of the 3rd quarter, the company has completed construction and put into operation a total of 60 large-scale universal energy projects. A total of 270 large-scale universal energy projects have been put into operation, bringing a total of 24.430 billion kilowatt-hours of comprehensive energy sales to the group, including cold, heat, electricity, and steam, an increase of 34.2% over the previous year. During the period, the Group's natural gas retail sales volume recorded 17.955 billion cubic meters, a year-on-year decrease of 4.7%.

China Gas (00384): China Gas is one of the largest cross-regional integrated energy supply and service enterprises in China. It mainly invests in, constructs and operates urban and township gas pipeline infrastructure, gas terminals, storage and transportation facilities and gas logistics systems, transports natural gas and liquefied petroleum gas to residents and industrial and commercial users, constructs and operates compressed natural gas/liquefied natural gas filling stations, and develops and applies natural gas and liquefied petroleum gas related technology.