On April 7th, Chongqing listed company Kangda Environmental Protection announced that Li Zhong, Liu Yujie, and Lin Nan have been appointed as executive directors, and Zhou Jinrong has been appointed as an independent non-executive director of the company. These four individuals are all from the Chinese water industry.

On the evening of April 3rd, China Water announced that its wholly-owned subsidiary Sharp Profit Investments Limited had signed an acquisition agreement with Kanda Environmental Protection. According to the agreement, China Water has agreed to purchase approximately 29.52% of the total issued share capital of Kangda Environmental Protection, totaling 600 million shares and HKD 1.2 billion,

After the transaction is completed, China Water will become the major shareholder of Kangda Environmental Protection. In the future, Kangda Environmental Protection will also be recognized as a joint venture of China Water and contribute profits.

At the beginning of the year, there were many cases of water companies introducing major shareholders, which may have set the tone for this year's water market.

collaboration

Both China Water and Kangda Environmental Protection have significant backgrounds and complementary businesses, making this acquisition a perfect match.

The core business of China Water is mainly focused on water supply and environmental protection, among which environmental protection includes providing sewage treatment and drainage operation and construction services, solid waste and hazardous waste business, environmental sanitation and water environment treatment. In the 2018 fiscal year, China Water's total revenue reached HKD 7.58 billion, with revenue from water supply and environmental protection accounting for 81.8% and 10.7% respectively.

Kangda Environmental Protection's core business focuses more on urban water treatment, comprehensive water environment management, and rural sewage treatment. At present, Kangda Environmental Protection's urban water treatment division has a total of 107 projects with a daily designed processing capacity of 4.2684 million tons.

As leading companies in the same industry, both parties can be said to have a deep understanding. Listed on the Hong Kong Stock Exchange for many years, they can also complement each other in terms of business.

For China Water, after acquiring Kangda Environmental Protection, its business will expand to provinces such as Shandong, Heilongjiang, Zhejiang, Anhui, and Shanxi, and its influence in some areas will rapidly expand.

For Kangda Environmental Protection, it not only reduces financing costs and finds sources of funding for its numerous projects, but also effectively improves its financial level.

Compared to China Water, Kangda Environmental Protection's finances are slightly inferior. In 2018, the corporate income tax expenditure rate of Kangda Environmental Protection was as high as 32%, with a gross profit margin of 36.18%, a net profit margin of 10.25%, and a net loan to equity ratio of 187%. If more management experience and models can be integrated, Kangda Environmental Protection's performance is expected to reach a higher level.

Main theme of water management enterprises: marriage alliance and investment attraction

In 2018, the water industry sounded the horn for the second half, and under the new trend, water companies also began a craze for capital.

On March 29th, Xingyuan Environment announced that its controlling shareholder Xingyuan Holdings has signed a share transfer agreement with New Hope Investment Group. Xingyuan Holdings will transfer its 23.60% stake in the company to New Hope Investment Group. Liu Yonghao, the king of feed, successfully took over the fourth listed company.

This struggling water company stumbled for half a year and finally found its "good dad" after unsuccessful negotiations with the China Coal Geology Administration and others.

I look forward to this richest man in Sichuan bringing new vitality to Xingyuan Environment.

Of course, unlike last year's crisis companies that were eager to seek capital, now the water industry has also begun to compete.

At the beginning of the year, Bishuiyuan attracted the support of Chuantou Group to gradually expand its business to the southwest region; Beijing Enterprises Water Group has formed an alliance with Three Gorges Group, hoping to make a difference in the Yangtze River Basin; As an environmental comprehensive service provider, Qidi Sande also relies on the wealthy Xiong'an Group.

In the second half of entering the water market, there is a clear characteristic that environmental protection companies are no longer fighting alone.

There is no doubt that the projects in the water industry in 2019 are mainly rural sewage treatment and watershed management (especially in the Yangtze River Basin). The former requires enterprises to deeply cultivate and layout in different regions, while the latter requires stronger capital and more technology, which makes the alliance and investment attraction between water companies the main theme of 2019.

A fence with three stakes. In the future, regional governance will become a trend, and such alliances will become more common. In the following years, whether in small or large enterprises, cooperation between enterprises will become increasingly close, and it will be difficult to follow the trend alone.