Water sector draws investment

July 12, 2020 | 16:26
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The water supply and drainage sector is drawing investment thanks to its high profit margins and good growth potential.
water sector draws investment
A worker of Ha Noi Water Co Ltd (Hawacom). Hawacom is among the enterprises that occupy the largest market shares in the water supply industry. Photo hawacom.vn

According to the HCM City Securities Corporation (HSC), the water industry has positive prospects as rapid urbanisation and population growth have led to a higher demand for water for industrial production and clean water consumption.

The annual compound growth rate (CAGR) of the water sector in 2017-2020 is 43 per cent for industrial production and 35 per cent for clean water consumption.

Enterprises that occupy the largest market shares in the water supply industry include Dong Nai Plastic JSC, Binh Duong Water Environment JSC, Thu Dau Mot Water JSC, Ha Dong Clean Water JSC, Ha Noi Water Co Ltd (Hawacom) and Song Da Clean Water Investment JSC (Viwasupco).

HSC said more than 80 per cent of enterprises in the industry have gross profit margins of more than 30 per cent. In the first quarter of this year, the firms with the highest gross profit margins were Vinh Long Water Supply JSC with 65 per cent, Thai Nguyen Clean Water JSC with 58 per cent and Viwasupco at 47 per cent.

Viwasupco last year achieved revenue of VND540 billion (US$23.4 million), up 15 per cent compared to 2018.

The State divested its capital from Viwasupco in 2017. It now has two major shareholders, Gelex Energy One Member Co Ltd holding more than 60.45 per cent and Refrigeration Electrical Engineering Corporation holding 35.95 per cent.

Viwasupco provides about 25 per cent of the total clean water output for Ha Noi via its distribution partners, serving more than 1.1 million people in the city.

Although Viwasupco's market share in Ha Noi is forecast to fluctuate in the near future due to the founding of many new rivals, Viwasupco plans to upgrade its system to increase competitiveness and strengthen co-operation with distribution partners.

Viwasupco said Song Da Clean Water Project Phase 2, Tay Mo regulator station and its clean water transmission pipeline system were the key focuses in 2019-2020.

The company's revenue from the clean water supply segment increased from VND373 billion in 2018 to VND540 billion in 2019, reaching the highest growth rate in the segment with an increase of 45 per cent. Gross profit rose 28 per cent from VND218 billion in 2018 to VND279 billion in 2019, becoming one of the segments with the highest profit growth in the company.

Son Ha Group has also announced plans to expand operations. Clean water supply will be one of three new strategic areas Son Ha will expand in this year, in addition to renewable energy and industrial real estate.

At the Annual General Meeting of Shareholders of Son Ha Group held last month, Chairman of the Board of Directors Le Minh Son said Son Ha would focus on the production and supply of clean water and wastewater treatment.

The RO water purifier product of Son Ha has only met demand for water treatment on a small scale. The group plans to deliver a solution for a larger scale, Son said

Earlier, Son Ha acquired stakes in Ha Dong Clean Water JSC and Lang Son Water JSC as well as in some other water plants. The firm expects to earn revenue of VND200 billion from the water segment.

The group is working with a Japanese partner to provide a solution to filter wastewater before discharging into the environment while providing this solution for manufacturing plants in the near future, Son said.

With the positive growth prospects of the water supply industry, many foreign investors have increased their ownership in local water companies on Viet Nam's stock market.

Vietnam-Oman Investment JSC, a joint venture between the Oman National Reserve Fund and the State Capital Investment Corporation (SCIC), has poured $19 million into the Song Hau Water Plant.

This factory serves water demand in the southern provinces of Soc Trang and Hau Giang.

Philippines-based Manila Water Asia Pacific has also invested in Saigon Water Infrastructure JSC.


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