Cinda: Reasonable pricing for public utilities, national water prices may be adjusted or entering a new phase.

Cinda released a research report, stating that on March 21, the Shenzhen Municipal Development and Reform Commission issued a notice adjusting water prices. Along with this adjustment, major first-tier cities such as Shanghai, Changsha, Nanjing, and Guangzhou have already adjusted or plan to adjust their water prices. A nationwide water price adjustment may enter a new phase, with some cities with low water prices such as Wuhan, Nanning, Lanzhou, Haikou, and Guiyang having room for price increases. On April 2, the Central Committee and State Council issued the "Opinions on Improving the Price Governance Mechanism," which is expected to further promote the market-oriented reform of water prices, especially in areas where water prices have been low and unchanged for many years, in order to re-evaluate prices to relieve enterprise water supply costs and alleviate operational pressures. Cinda's main points are as follows: Following the adjustment of water prices in cities like Shanghai, Nanjing, and Changsha, Shenzhen has announced a plan to raise water prices by 13%. The adjustment in Shenzhen involves raising the comprehensive price of tap water from 3.45 yuan per ton to 3.9 yuan per cubic meter (including tax), a 13.05% increase. The first-tiered water pricing in Option One remains unchanged at 2.67 yuan per ton, while in Option Two, the first-tiered water pricing increases from 2.67 yuan per ton to 2.94 yuan per ton, a 10.1% increase, resulting in an average monthly increase of 5.94 yuan for a family of four. According to Cinda's statistics, since 2024, water price adjustments have been gradually implemented in provinces and cities such as Guangdong, Jiangsu, Chongqing, and Shaanxi. Looking at the current water prices in provincial capital cities nationwide, cities like Wuhan, Nanning, Lanzhou, Nanchang, and Chengdu are in the lower end of the price range, with room for water price increases. The Central Committee and State Council issued another document promoting the market-oriented reform of public utilities, which is expected to accelerate the approval of water price adjustments. On April 2, the Central Committee and State Council issued the "Opinions on Improving the Price Governance Mechanism," proposing to "strengthen cost constraints and income supervision for enterprises, comprehensively assess cost changes... and improve the dynamic pricing mechanism for public utilities." It can be seen that both the water price adjustment plans proposed by Shenzhen and Guangzhou mention an increase in water company costs, with water supply revenue no longer sufficient to cover the costs including taxes. The policy issuance will further catalyze the market-oriented reform of water prices, especially in areas where water prices have been low and unchanged for many years, there is hope to re-evaluate water prices to alleviate enterprise water supply costs and relieve operational pressures. On the stock side: Recommended to pay attention to Grandblue Environment (600323.SH): monopolizes the water supply in the Nanhai district of Foshan City, may benefit from the trend of price adjustments in Guangdong region, combined with the continuous progress of CANVEST ENV acquisition, it is expected to significantly increase profits; Chengdu Xingrong Environment (000598.SZ): a water company in the main urban area of Chengdu, water and solid waste assets are expected to be put into operation gradually, with strong performance growth; Jiangxi Hongcheng Environment (600461.SH): a water company in Nanchang, entering a stable operational stage, with a potential 25-year dividend yield of over 5%. It is recommended to pay attention to Wuhan Sanzhen Industry Holding (600168.SH): The parent company operates the tap water business in Wuhan, where the water prices are at the lowest level in the country, leading to consecutive losses in the parent company's tap water business. An increase in water prices may improve the parent company's profitability, driving the injection of tap water assets into the listed company; CHINA WATER (00855): with water utility business nationwide layout, benefiting from the nationwide trend of water price increases. Risk warning: Water price reform may not proceed as expected; accounts receivable collection period may extend; asset injection pace may not meet expectations;