Environmental protection industry ushered in last week's double positive. Media reports, the current Ministry of Environmental Protection is accelerating the development of "Thirteen Five" plan, planning will improve environmental quality at the core, gas water and soil will promote the implementation of three environmental campaign. The plan submitted to the State Council, is expected in March next year. We expect total investment during the "Thirteen Five" plan will be significantly higher than the "second five" plan of 3.4 trillion. Besides the People's Bank and October 24 evening announced the "double down", cut deposit and lending rates by 0.25 percentage points, respectively, to 1.5% and 4.35%. We believe that the general trend of the central bank continued to cut interest rates, high leverage of the environmental protection industry will continue to enjoy favorable monetary easing.
Comment.

       Frequent good policy, "Thirteen Five" green investment is expected to significantly overweight. Recently, strengthen environmental regulation, to accelerate the sponge urban construction, and comprehensively promote the water-gas-solid three plates governance, good policy frequent. At the same time, the largest single national environmental protection PPP gradually released, the market place, "Thirteen Five" plan to enhance environmental protection investment amount of very high expectations. "Twelfth Five-Year Plan" China's environmental protection investment of 3.4 trillion, we believe that during the "Thirteen Five Year Plan" the amount of investment will be significantly higher than this level, to promote the environmental protection industry will be very obvious. Especially in waste generation, classification disposal of food waste, sludge treatment, hazardous waste integrated treatment, respect sponge urban construction, environmental monitoring and other large data, we believe that policy tilted efforts will be further strengthened.

       Theoretically double down year for environmental protection of listed companies to save 1.3 billion yuan financing costs. We'll environmental protection industry in the past eight years, the overall debt ratios do longitudinal comparison, we found basically stable at a level of 23%, but some companies is much higher than this level. Overall, the industry's financing costs at around 6% (in combination with the overall level of corporate debt and bank loans, corporate bonds currently coupon rate will be a little higher). If 100% of the bank loan is simple to assume, it will save 1.3 billion yuan to environmental protection enterprises financing costs (14 years all environmental listed companies' financial costs 5.6 billion yuan). If you follow the ratio of 50/50 to assume corporate bonds and bank loans ratio, but also for enterprises to save nearly $ 700 million cost in the short term. Meanwhile, companies in the future have a stronger motivation issued a lower coupon rate corporate bonds, corporate bonds for replacement of the original, thereby gradually reduce financing costs in the subsequent period.

       Easing of solid waste and flue gas sector more favorable. We were compared the atmosphere, solid waste, water and monitoring sector companies, find assets and liabilities by the end of 14, solid waste and flue gas sector, higher net debt ratio. Especially the solid waste sector in the past eight years, showing a more aggressive leverage trend. This mode of use and high leverage mature industry, the overall business model mainly related to BOT orders. BOT mode key, is to reduce operating costs, including financing costs. In early September our industry depth report on "Solid Waste Management section - When the frost eventually landing day, fertile soil will see flowers" has been proposed, the solid waste sector has entered a mature stage of development, the future trend will be the typical capital-intensive type trend, companies in finance - mergers and acquisitions between companies seeking to develop cycle, corporate financing capacity and financing costs will determine the future status of the companies in the industry - to take the project - Refinancing - retake the project. At the same time, because the flue gas sector's future growth space is more limited, the enterprises in the industry even more urgent need for a period of adjustment to reduce the pressure from the cost side, we continue to believe will be more relaxed policy environment conducive to business to survive the winter. (Please refer to our industry depth report in mid-June release of "flue gas treatment sections - cold winter dormant waiting for spring, Xijinqianhua really start now").

       Incentives and monetary environment will boost environmental protection and urban investment projects PPP projects usher in the spring. After double down, we are responsible for the first time and several state-owned bank branch's lending arm for the exchange, feedback received is: Although the deposit-loan ratio canceled, current bank deposits and loans in accordance with the general will still try to claim old lending, but more inclined to a higher rate of return, more stable, longer-term projects. Environmental class PPP projects, listed companies and investment companies to participate in the city, will be a good plus points, the actual short-term lending rates are generally floating benchmark interest rate between 1.05 to 1.2. At the same time, it will give some concessions green credit channel. We believe that with the "Thirteen Five" plan the upcoming government in promoting PPP projects will gradually overweight, having a stable income environmental PPP packets will be actively involved in the direction of bank lending sector.