2023 will be a turning point for environmental protection people in Qingshan

Tsingshan Industry Review 2023 year-end special issue.

2023 is about to turn the page, and for the past year, I think young friends will have a lot of feelings.

In the past year's survey of Tsingshan Research Institute, many friends said that the situation this year was unexpected, and the development trajectory of the industry and the expectations of practitioners deviated greatly.

It can be said that this year is the year with the strongest sense of endangerment, and a general manager of an environmental protection equipment company said, "This year I feel a sense of urgency that has not been seen in the past ten years, and I feel that the end of the market is in sight."

A senior executive of a central enterprise said, "Many operating assets are facing maturity, and the trend of local ** recovery of assets is very strong, and exploring new growth momentum is the most important thing for senior management this year."

Now it seems that the era of masks is gone, and I thought that the year would be better after the epidemic, but I didn't expect the situation to become more difficult. The entire industry is shrouded in great uncertainty, and confusion is full of many people's minds.

Many friends say that 2023 is a disaster year for the performance of the environmental protection industry. In fact, the performance panic is only the appearance, this year is a turning point in the environmental protection industry, behind every unexpected, a common industrial change is taking place.

This is the last article of Tsingshan Research Institute's 2023 year, and we will conduct an in-depth review of the past year.

A must-see ceiling and a must-roll whirlpool

Looking back on the past year, the most eye-catching and heart-wrenching thing is that the performance of environmental protection enterprises has declined in a large area.

Objectively speaking, an industry will inevitably encounter a ceiling in the development stage of the same underlying logic. However, the decline in performance in 2023 has exceeded many people's expectations, which has forced many companies to start paying attention to the underlying changes in the industry.

In the past year's performance blows, for small enterprises, there have been a considerable number of strong support, hopelessness to break the situation, give up the struggle.

For medium-sized enterprises, after experiencing the paradoxical performance of the market this year, many have begun to give up the obsession of pursuing scale, shrink and maintain stability for the winter.

For some of the leading state-owned enterprises, after the big march, they are also facing the situation of growth stalling and sense of direction failure, on the one hand, the short-term worry of performance reduction, and on the other hand, the long-term concern that operating assets will be recovered by the local government.

The industry is busy and finds that the lack of technology and professional connotation still makes the enterprise model fall back to the state of exporting labor services. This is a more stinging crisis under the performance of ragged performance, so that many environmental protection enterprises are in a dilemma.

Therefore, one of the industry's ideas for change is to do practical connotation, and productization, intelligence and cross-border development all originate from this.

Frankly, when disaster has already struck, it is too late to discuss how to deal with it. But in fact, the performance cold wave of the environmental protection industry is more like an unavoidable whirlpool.

A person in charge of a water treatment company said that the situation of the environmental protection industry, even if the crisis is predicted, many companies are unable to deal with it, and the development of the environmental protection industry at this stage is a whirlpool, although everyone knows it, but still has to be involved.

Compared with the decline in performance, this whirlpool is the real uncomfortable place for environmental protection enterprises, knowing the risks, but having to passively participate in the involution.

This is the dilemma of the times, and it is inevitable to come after the carnival of the times.

However, in the current economic context and business environment, it has become more difficult to identify industry trends and respond to industry crises.

The first is the abstraction of industry trendsIt is difficult to capture through everyday feelings, and the cost of trial and error increases, requiring deep cognitive analysis and reasoning. In the communication with some corporate bosses, it can be noticed that their thinking in the direction of the enterprise is obviously increasing, and they are more rational than before.

The second is the delay of the industry's dilemmaThe risk contagion time is prolonged and cannot be terminated. The performance of the past year shows that the environmental protection industry has structurally entered a new stage, and it is necessary for enterprises to prepare for a protracted battle.

The third is the borderless nature of the risk crisisChanges in other industries may affect the environmental protection industry. The most significant of this is that the ups and downs of various industries will affect the willingness of Party A in the environmental protection industry to pay, and the current high accounts receivable have a great impact on the cash flow of environmental protection enterprises.

So, what's really going on behind the predicament?Where is the industry headed?The answer is basically reflected in the turning point of the environmental protection industry in 2023.

A major turning point for the environmental industry in 2023

The theme of this article is "Turning Point", because the turning point is the most significant feature of this year, and according to the research of the whole year, it can be divided into the following aspects, which are reshaping the underlying logic and competitive landscape of the environmental protection industry:

1. Market turning: incremental deceleration, stock optimization

Under the main logic of governance at the end of the first half, with the continuous investment in infrastructure construction, the incremental space of the environmental protection market has gradually shrunk, and the optimization and upgrading of the stock market has become a new growth point. Environmental protection enterprises need to shift from simply pursuing scale expansion to improving efficiency and quality, improving service capabilities and added value.

2. Drive turn: the policy drive is weakened, and the quality drive is stronger

The development of the environmental protection industry has always been strongly influenced by policies, and the planning, standards, and subsidies are all important driving factors. However, the objective and real situation of environmental problems, the requirements for the service quality of the environmental protection industry are still urgent, and the environmental protection industry is shifting from relying solely on policy-driven to quality-driven as the core.

3. Background turn: the economic trend is declining, and the policy dividend period has passed

There are two major backgrounds for the rapid growth of the environmental protection industry in the past decade, one is the rapid growth of the economy, and the other is the construction of environmental protection policies, the former provides money, and the latter provides the market. But now these two backgrounds are at a turning point, and the environmental protection industry needs to adapt to the new economic situation and market environment, and find new growth drivers and competitive advantages.

4. Demand transition: from extensive standards to economic, safe and convenient

In the past, the industry mainly solved the problem of reaching the standard, which is the goal of the first half of the environmental protection industry, is to achieve the basic line passing, and enter the second half to solve the problem in more dimensions of the user, and the core pain point of the problem has changed from reaching the standard to being economical, safe and convenient.

Strictly speaking, the first half is to solve social problems, and the second half is to solve the pain points of owners.

5. Capital transition: from fanatical pursuit to return to rationality

There has also been a significant shift in the performance of the environmental protection industry in terms of capital, with 14 IPOs of environmental companies in 2022 and significant reductions this year;In addition, since the beginning of this year, the number of mergers and acquisitions in the environmental protection industry has also decreased significantly, which shows the expectations of the industry's leading enterprises on the downward trend.

In the early years, the environmental protection industry was popular in the capital market, and all kinds of capital poured in, which promoted the rapid development of the environmental protection industry. However, with the intensification of industry competition and increasing pressure on profitability, the attitude of the capital market towards the environmental protection industry has returned from fanaticism to rationality.

6. Turning point of the track: from competing for the big track to deep cultivation of the small track

In the past environmental protection market, most of the enterprises were concentrated in several large tracks, such as municipal water treatment, waste incineration, desulfurization and denitrification, etc., which have a large market scale. With the saturation and homogenization of these large tracks, some companies have begun to turn to some small and long-term tracks, which, although small in scale, have high technical content and professionalism, and can also bring higher profit margins and sustainable growth potential.

7. Mode transition: from piling up resources to digging deeper internal driving force

In the past environmental competition, many enterprises have adopted the model of resource accumulation, through mergers and acquisitions, expansion, integration and other ways, the pursuit of scale effect and market share. However, with the changes in the industry environment, this model has become unsustainable, and environmental protection enterprises need to dig deeper driving force inward, and enhance their core competitiveness and sustainable development capabilities through innovation, optimization, and collaboration.

The environmental protection industry is switching between the two halves, and the essence of the switch is that the above turning points are happening at the same time and violently.

Regarding these changes, Tsingshan Research Institute has a systematic and in-depth interpretation in this year's article, which will not be repeated in this article, and friends who need to know more about it can refer to the following articles:

Red Sea Era, 5 Challenges in the Environmental Protection Industry Aoyama.

The War on Efficiency: The Endgame of the Eco-Friendly Enterprise Aoyama.

The end of the first decade in the environmental protection industry Tsingshan.

Delving into 108 environmental protection listed companies, we see 5 major divergent trends in Tsingshan.

China's environmental protection, the great era of three waves concurrently Qingshan.

Environmental protection supervision has changed dramatically, and the industry has entered the knockout round of Qingshan.

Winning the second half, the challenge and breakthrough of environmental protection enterprises Tsingshan.

In the next 3 years, the "life-and-death battle" of environmental protection enterprises Tsingshan (written in February 2023).

Soaring capital and drastic environmental protection Qingshan.

I won't list them all here, pay attention to Tsingshan Industry Review **See more original content. )

Without steady economic growth, it is difficult to have the sustainable development of the environmental protection industry. Economic upgrading has led to environmental protection upgrades, and sluggish economic growth has led to environmental concessions.

Some people may be pessimistic from the above analysis, but this is not the intention of this article, these analyses are more to help practitioners see the current situation more realistically, so as to assist in judgment.

Standing in the middle of the environmental protection industry, the outlook is high

2023 is the midfield of the 14th Five-Year Plan, and it is also at the turning point of the environmental protection industry. At this juncture, a sense of the future and direction is particularly important.

On this topic, I have had many times with several entrepreneurs who started their own businesses, and the following points can be extracted from their conversations:

At present, most enterprises pay too much attention to external factors, and what can cause a crisis more than a decline in performance is that the enterprise is not on an upgrade track and is not on the channel to the future. In the face of the future, what may really have to be fought is the inertia of the enterprise itself. Many companies have already fallen into institutional rigidity in the first half of development, and more serious than the debt burden is the degradation of organizational vitality and capabilities. It is not difficult to find that some leading companies are slow to respond to the forefront of the market, and are tied to the intricate interests in the engineering mode in the first half. The inertia driven by resource capital is too strong, and the technological innovation connotation of environmental protection enterprises is lacking. In many cases, there is no essential difference between a larger and a smaller one, and more often it is the disorderly expansion of the scale that leads to the crisis, and at this stage, stability is greater than the scale. These reflections and perspectives are highly and pragmatic.

In Tsingshan's previous article, we explained a basic situation, that is, most environmental protection enterprises have more than enough strength in "horizontal development" (here refers to complete cross-border horizontal expansion), there are not many cards to play in hand, and the ability model can support and hold the turf is already outstanding.

In fact, "vertical focus" is almost one of the few new doors for environmental protection enterprises at this stage. If we refer to the world's leading environmental protection giants, their development process has a long-term strategic focus, and its development process of dozens or hundreds of years is the process of achieving the ultimate in a field.

There have been many discussions in the industry about the thematic exploration of the "second curve", and it cannot be said that there are no successful cases, but most of the cases seen so far are weak in universality.

"Vertical focus" is built on the basis of the benign evolution of the industry. At present, although there is still a long way to go in the process of the environmental protection industry from pseudo demand to real demand, from medium quality to high quality, there are at least two points that can anchor confidence, one is that the legislation of the environmental protection industry has been initially completed and improved, and the other is that the real demand for environmental protection has not been fully met.

Behind the overall decline in performance, what is the real situation of demand, which involves the level of environmental protection demand:

Level 1: Make a showThe second layer: extensive standardsTier 3: Economical, safe and convenient to meet the standardsIn the future, the development of the environmental protection industry will basically not deviate from this path, and enter the second half, and the industry will basically enter the stage of leaping from the second layer to the third layer. It is clear that most environmental protection companies can meet the standards, but only a few companies can achieve the standards "economically", "safely" and "conveniently".

This will be a high ground for many enterprises to strive for, and some enterprises in subdivided fields have been actively responding to this underlying change.

From the perspective of demand upgrading and industrial development, this evolution logic will appear in more fields and on a larger scale in the future. When the spotlight of real demand shines on the industry, the competition around real kung fu really begins.

In response to this topic, there will be a special article for in-depth interpretation in the future.

Seeking truth and pragmatism is always the best strategy

In the past period of time, the team of Tsingshan Research Institute has gone through every field of the environmental protection industry, done a lot of research, and written a lot of articlesFocus on the high-quality development of real needs and real kung fu.

In 2023, a lot of things have happened in this world, leaving many people, and the great changes in the world have brought us sighs, but also let us know that the truth is precious, and everything must return to seeking truth from facts, and seeking truth and pragmatism is always the best strategy.

Environmental protection industry is an important industry to build the foundation of modern social operation, but environmental protection people are destined to create "clear water", "blue sky", "pure land" of the lonely brave, this industry is not bright, but to bring the world bright is the mission of this industry.

Finally, to paraphrase Marquez's phrase, I would like to encourage all environmentalists:

If the demand is fake, the development of the industry will be a fruitless road, all the good times in the past can not be replicated, even the most fanatical PPP model, in the final analysis, is just a fleeting joy, only high-quality development is eternal.

** Castle Peak Industry Review Official***

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