In recent years, China has issued a series of water conservancy-related laws, regulations and policies, increased investment in water conservancy, and accelerated the construction of major water conservancy projects.

China completed 736.1 billion yuan of investment in water conservancy construction
According to Xinhua News Agency, on September 13, Minister of Water Resources Li Guoying stated at the "Authoritative Departments Discuss the Start" series of themed press conferences held by the State Council Information Office that from January to August this year, 985.6 billion yuan of national water conservancy construction investment was secured, 23,600 water conservancy projects of various types were newly started, and 736.1 billion yuan of water conservancy construction investment was completed, all setting record highs for the same period in history.
Li Guoying introduced that from January to August this year, water conservancy project construction absorbed 1.971 million employed people, providing strong support for the economic recovery and improvement. A number of major national water network projects, such as the Yangtze River-to-Han River water diversion project of the South-to-North Water Diversion Middle Route, the Beibu Gulf Rim Water Resources Allocation Project, and the second phase of the Huaihe River Estuary-to-Sea Channel Project, are being accelerated, and the construction of provincial, municipal and county-level water networks is proceeding in an orderly manner.
Zhang Xiangwei, Director of the Planning and Program Department of the Ministry of Water Resources, said that the construction of backbone projects of the national water network has clearly accelerated. While accelerating the construction progress of a number of ongoing projects such as the Central Yunnan Water Diversion Project, Dongzhuang in the Yellow River Basin, and Datengxia in the Pearl River Basin, a number of major projects were started this year, including the Jilin Water Network Backbone Project and the Hebei Xiong'an Main Canal of the South-to-North Water Diversion Middle Route.
In recent years, China has issued a series of water conservancy-related laws, regulations and policies, increased investment in water conservancy, and accelerated the construction of major water conservancy projects. The Outline of the National Water Network Construction Plan proposes that by 2025, a batch of backbone projects of the national water network will be built, with efforts focused on shoring up shortcomings and weak links in water resources allocation, urban and rural water supply, flood control and drainage, water ecological protection, and intelligent water networks. By 2035, the overall pattern of the national water network will basically take shape, the main framework and major arteries of the national water network will be gradually completed, and provincial, municipal and county-level water networks will be basically improved.
A research report by China Post Securities shows that during the 14th Five-Year Plan period, the country plans to complete 5.2 trillion yuan of water conservancy investment, an increase of 57% over the actual investment during the 13th Five-Year Plan period, with 35.7% of the progress completed in 2022. The construction of major water conservancy projects is expected to accelerate, and central state-owned construction enterprises related to water conservancy projects as well as pipe material enterprises such as PCCP are expected to benefit.

List of concept stocks with high growth potential
According to statistics from Securities Times DataBao, in the first half of this year, the net profit of more than half of the water conservancy construction concept stocks increased year on year. Poly Union, Shenzhen Ruijie, Shenzhen Urban Transport Planning Center, Gudi Technology, Guodian Nanjing Automation and others ranked high in net profit growth.
Poly Union ranked first in net profit growth, achieving a net profit of 73 million yuan in the first half of the year, a year-on-year increase of 34.43 times. The company's licensed production capacity and scale of civil explosives are among the top in China, with its licensed electronic detonator capacity ranking first in China. Its products are widely used in mining, water conservancy and hydropower, infrastructure construction, urban renewal and national defense construction. During the reporting period, the company's sales of explosives and electronic detonators increased year on year, driving an increase in revenue and profit.
In terms of secondary market performance, as of the close on September 13, water conservancy construction concept stocks have risen by an average of 9.68% this year, far exceeding the Shanghai Composite Index over the same period. The top five gainers were Neoway Technology, Shenzhen Ruijie, New City, Gudi Technology and Surveying and Mapping Shares. Neoway Technology ranked first with a cumulative increase of 174.91%. The company is mainly engaged in the Internet of Things wireless communication business and had continued net profit losses over the past three years, with a net profit loss of 44 million yuan in the first half of this year.
From the perspective of valuation levels, as of now, the rolling price-to-earnings ratios of 35 concept stocks are below 20 times. Shandong Luqiao, China Railway Construction, Shaanxi Construction Engineering, China Railway Group, Anhui Construction Engineering and others have rolling price-to-earnings ratios of less than 10 times. Shandong Luqiao has a rolling price-to-earnings ratio of 3.98 times, the lowest. Its subsidiary Zhonggong Wuhan University is one of the main design units of the Hainan Hongling Irrigation District Project, one of China's 172 major water conservancy projects, and holds a series of specialized qualifications in the water conservancy industry, including Grade A professional qualification in water conservancy (irrigation and drainage), Grade B qualification in the water conservancy industry, and Grade II general contracting qualification for water conservancy and hydropower engineering construction.
According to the consensus forecasts of five or more institutions, only 10 concept stocks are expected to achieve net profit growth of more than 20% in both this year and next year. The one with the highest average forecast net profit growth is Yuangong Shares, whose average net profit growth is expected to reach 275%. A BOC International research report believes that Yuangong Shares, as one of the leading enterprises in the plastic pipe industry, has obvious advantages in products, scale, brand and channels. As the company's capacity utilization rate increases, economies of scale will improve and cost control capabilities will be enhanced.