Zhitung Finance APP has learned that Tianfeng released a Research Report stating that China has previously experienced three rounds of large-scale debt resolution actions: the first round from 2015 to 2017, the second round from 2018 to 2019, and the third round since 2023, known as the "package debt resolution plan." In the first two rounds, the pace of debt expansion in the eco-friendly industry was highly correlated with the rise and fall of the PPP mode. At this moment, the pressure on accounts receivable has become a significant factor dragging down the financial statements of the eco-friendly industry. The current "6+4+2" debt resolution combination is substantial and is expected to have a positive impact on the public eco-friendly industry.

Tianfeng Securities' main points are as follows:

How will the accounts receivable of the eco-friendly industry improve? When will it improve?

Tianfeng believes that debt resolution is expected to alleviate the accounts receivable pressure on eco-friendly companies, primarily through the following pathways: new bond issuance to repay corporate debts; alleviating government debt pressure and optimizing fiscal expenditure rhythm; and improving the business environment to create a positive cycle of economic development. In terms of timing, improvements in corporate financial statements are expected this year or next, with priority benefits likely going to funds related to livelihood and long-aging project payments.

With the ongoing advancement of government debt resolution, under optimistic expectations, the total accounts receivable owed by companies to the government and state-owned enterprises is expected to decline, with substantial recoveries in impairments anticipated, leading to a systemic rise in the valuations of industries facing significant cash flow pressures. Under neutral expectations, the total accounts receivable may still grow, but the aging structure may improve; the impairments booked against long-aging receivables may exhibit characteristics of a "pulse recovery."

Bullish Direction One: Accounts receivable for operational services with a certain degree of necessity.

A significant portion of the revenue from the sanitation, water operation, and waste incineration industries comes from local government fiscal expenditures, and the services provided have certain essential characteristics. Among them, sanitation enterprises are highly labor-intensive and are expected to benefit first from debt resolution; the repayment of water operation companies is highly dependent on the financial condition of their service areas, which requires attention on a case-by-case basis; the accounts receivable elasticity of waste incineration companies is slightly lower than the previous two, but they may benefit from improvements in waste treatment fee debt resolution and national subsidy repayments.

It is recommended to pay attention to the sanitation company Eit Environmental Development Group (300815.SZ) and QiaoYin City Management (002973.SZ); water operation companies Chengdu Xingrong Environment (000598.SZ) and Wuhan Sanzhen Industry Holding (600168.SH); waste incineration companies Grandblue Environment (600323.SH) and EB ENVIRONMENT (00257).

Positive direction two: Existing PPP projects and long-aged EPC project debts.

Due to the owner's declining payment capacity, the financial reports of eco-friendly companies involved in engineering and PPP businesses are severely impacted, and there is a large improvement elasticity. Considering the continuity of past policies, projects that do not belong to hidden debts can also benefit from this round of debt resolution. It is necessary to pay attention to the risks of debt restructuring and discounted repayments for such accounts receivable.

It is recommended to focus on Central Plains Environment Protection (000544.SZ) and BJ ENT WATER (00371), which have stable operation businesses and outstanding PPP debts; as well as Zhenghe Ecology (605069.SH), Beijing Originwater Technology (300070.SZ), WELLE Environmental Group (300190.SZ), and CSD Water Service (603903.SH), which have greater repayment elasticity and relatively sufficient prior impairment provisions.

Outlook for debt resolution in the electrical utilities industry: A solution is needed for the funding sources of renewable energy subsidies.

The boots have not yet dropped (subsidy verification work is not fully completed) and the pool is not big enough (the revenue-expenditure gap of the renewable energy fund subsidies is significant), are two sides of the ongoing subsidy arrears issue. The first batch of renewable energy compliance lists has been in place for nearly two years, and there is bullish outlook for the expedited review of the second batch of compliance lists; while expanding green electricity trade, financing through renewable energy development settlement companies of the two networks is expected to become an important means to resolve the renewable energy subsidy gap.

It is recommended to pay attention to the new energy operators CHINA LONGYUAN (00916), DATANG RENEW (01798), CECEP Solar Energy (000591.SZ), NYOCOR (600821.SH), and Ning Xia Yin Xing Energy (000862.SZ); biomass incineration power generation company CEB GREENTECH (01257), Guangdong Chant Group Inc. (002616.SZ); and coal power transitioning to new energy symbols CHINA RES POWER (00836), Huaneng Power International, Inc. (600011.SH), and Huadian Power International Corporation (600027.SH).

Risk Warning: The risk that the strength and sustainability of local government debt resolution-related financing may fall short of expectations; the risk of continued growth in corporate accounts receivable; the risk of debt restructuring and significant discounts on accounts receivable; the risk that compliance reviews for renewable energy projects are fairly strict; there are numerous assumptions in the calculations, which may lead to subjective risk in the results.