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CITIC Envirotech plans to quench China's thirst and what it means for investors

 Matthew Shim
Matthew Shim4/9/2018 07:30 AM GMT+08  • 7 min read
CITIC Envirotech plans to quench China's thirst and what it means for investors
SINGAPORE (Apr 9): Water treatment company CITIC Envirotech showed up on our March 19 equity screener via a trailing 12-month EV/Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio versus a five-year Ebitda compounded annual grow
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SINGAPORE (Apr 9): Water treatment company CITIC Envirotech showed up on our March 19 equity screener via a trailing 12-month EV/Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio versus a five-year Ebitda compounded annual growth rate. EV, or enterprise value, is made up of market capitalisation plus debt, less cash plus minority interests and market value of preferred equity. CITIC Envirotech’s EV/Ebitda multiple was just 11.6 times relative to its five-year Ebitda CAGR at a sterling 55.2%.

Potable water is increasingly viewed as the new gold for this century. More than 80% of China’s underground water is not suitable for drinking, according to a 2016 report from China’s Ministry of Water Resources. Municipalities now have targets to attain higher classifications of water. On a scale of I to X, Type I is the best and Type III is potable water. China wants all its surface water to achieve a Type IV rating by 2030.

Enter CITIC Envirotech, the largest industrial wastewater treatment player in China. The company has invested in more than 60 water plants in China and Asia, with a total capacity of more than 5.5 million cu m a day. The water treatment and resources segment contributed to 21.2% of the group’s total revenue last year. CITIC Envirotech’s largest source of revenue (75.5% in FY2017) is its engineering procurement and construction (EPC) segment. Its smallest segment in terms of revenue (3.3% in FY2017) is its membrane segment.

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