The water sector rose sharply in midday trading on the 8th. As of press time, Hongcheng Environment, Qianjiang Water Conservancy, Chongqing Water Affairs, Zhongshan Public Water Affairs, Greentown Water Affairs, Jiangnan Water Affairs, and State Water Affairs rose by the daily limit, while Xingrong Environment and Bohai Sea shares rose more than 8%.
In terms of news, the newly revised measures for the Management of Urban Water supply prices and the measures for Supervision and Audit of Urban Water supply pricing costs will come into effect on October 1, 2021. The method defines the pricing principle and method of urban water supply price, the procedure of setting and adjusting price, the classification of water price, the way of pricing, standardizing the service charging behavior of water supply enterprises, and so on.
The main contents include: (1) to determine the price of urban water supply according to the method of "permitted cost plus reasonable income", to determine the permitted income through approved permitted cost and regulatory permitted income, and to determine the price of water supply according to the approved amount of water supply. (2) simplify the classification of water prices and clarify the pricing methods. Urban water supply is divided into three categories: residential water use, non-residential water use and special water use. residential water consumption implements a step-by-step water price system, and non-residential water consumption implements a progressive price increase system. (3) standardize the procedure of setting and adjusting prices and strengthen the disclosure of information. (4) standardize the charging behavior of service and improve the quality of service.
Guotai Junan Securities pointed out that the method makes it clear that the permitted rate of return for water supply enterprises is determined according to the rate of return on equity capital and the rate of return on debt capital, and the rate of return on equity capital is determined by the yield on 10-year treasury bonds plus no more than 4 percentage points. A reasonable rate of return will promote the healthy and sustainable development of the water supply industry, and the price adjustment mechanism of water companies will be clearer. The water price in China is seriously undervalued, the absolute value of water price is lower than that of most countries in the world, and the per capita disposable proportion of residents' water price expenditure is also far lower than the global average, which can not reflect the value of water resources. With the improvement of the price adjustment mechanism for water supply, the price of water supply is expected to rise, and water companies will continue to benefit.
The agency said that with the implementation of the new rules on water supply prices, the price adjustment mechanism of water companies is clearer, water prices are expected to rise, and factors such as low water prices, which originally suppressed the valuation of water companies, have been marginally improved. Recommend water sector, Chongqing water, pioneering environmental protection, Hongcheng environment, Xingrong environment, Beijing Water Control Group, Guangdong Investment, China Water, Everbright Water and so on as the beneficiary targets.