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Potential beneficiary of China’s growing environmental concerns

Sunpower, a PRC-based engineering company specializing in heat transfer, is tapping on the growing environmental concerns in China to venture into the steam and power generation sector. The PRC government plans to reduce carbon emissions by shutting down small and inefficient coal boilers throughout the country, and replacing them with large centralized boilers.

Technical expertise and local connections in place to ensure success

Sunpower is combining its expertise in heat transfer with the network of Dr Lin Yucheng, who acquired a 13.6% stake in the company recently, to bid for centralized boiler contracts. Dr Lin is the founder of United Envirotech, a PRC- based waste water treatment company. He has extensive links with local authorities and industrial parks to help open doors for Sunpower. So far, Sunpower has successfully tendered for two BOT/BOO projects – a RMB 817 million co-generation plant in Jiangsu province and a RMB 95 million centralized heating system in Hebei province.

Valuations are undemanding

Sunpower is currently trading at a trailing P/E of 8 times. In comparison, other PRC-based companies engaged in BOT and EPC projects , such as CITIC Envirotech, China Everbright Water and SIIC Environment, are trading at a PE of 16-38 times.