■ We initiate coverage on Sunpower Group (please refer to “Money Talk: “Explosive Growth On China’s Environmental Sunrise” dated 6 Jun 18 for the full report).
■ Huge demand of Rmb500b to replace smog-producing boilers as China’s Xi vows war on pollution; air pollution top priority. Since its 2013 “airpocalypse”, China has listed environmental protection as a main concern. Under President Xi (who has placed air pollution as a top priority), the government has set up a powerful new cabinet-level environment ministry, identified small inefficient coal boilers as the culprit of highly polluting smog, and set strict regulations to replace these boilers and promote clean energy heating. This has heralded an era of “central boilers” with a huge Rmb500b market.
■ Technological advantage leads to profitable high IRR GI projects. Sunpower is set to ride on this boiler replacement wave as it captures Green Investment (GI) projects with its core advantages of proprietary technology arsenal (its patented heat exchangers are one of the best in the world) and engineering experience. Sunpower is able to deliver steam at a lower price, giving it a competitive pricing edge, translating into both higher project capture rate (due to the bidding system) and attractive double-digit IRRs.
Source : UOB Kay Hian Research
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