The water supply and drainage sector is drawing investment thanks to its high profit margins and good growth potential.
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The water supply and drainage sector is drawing investment thanks to its high profit margins and good growth potential.
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 percent for industrial production and 35 percent 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, Hanoi Water Co Ltd (Hawacom) and Song Da Clean Water Investment JSC (Viwasupco).
HSC said more than 80 percent of enterprises in the industry have gross profit margins of more than 30 percent. In the first quarter of this year, the firms with the highest gross profit margins were Vinh Long Water Supply JSC with 65 percent, Thai Nguyen Clean Water JSC with 58 percent and Viwasupco at 47 percent.
Viwasupco provides about 25 percent of the total clean water output for Hanoi via its distribution partners, serving more than 1.1 million people in the city.
Although Viwasupco's market share in Hanoi 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 cooperation with distribution partners.
The company's revenue from the clean water supply segment increased from 373 billion VND in 2018 to 540 billion VND in 2019, reaching the highest growth rate in the segment with an increase of 45 percent. Gross profit rose 28 percent from 218 billion VND in 2018 to 279 billion VNDin 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.
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 200 billion VND 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 Vietnam'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 USD 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.
(Source: VNA)
