OUR BUSINESS STRATEGY
Enhance our research and development capabilities and introduce new technologies to further improve our operational efficiency and the competitiveness of our existing projects.
We are exploring automation and artificial intelligence to raise our productivity, cost efficiency and reliability. Our Longjiang Regional Headquarters pioneered the use of automated detection equipment to check the water quality in our plants. The detection equipment, constantly circling around the wastewater pool, monitors various quality indicators in the water, such as chemical oxygen demand (COD), total Kjeldahl nitrogen and total phosphorus and phosphate. The data relating to water quality are then analyzed. If the wastewater meets our quality standards, it will be released to the next step in the process. We are also developing fully automated plants for certain smaller wastewater treatment projects. If the technology is successfully implemented, these plants will be able to process wastewater with minimal human involvement. We only need to designate one person in a county control center to be in charge of all the plants throughout the county.
In certain plants, we use drones for water sampling. We are also experimenting with underwater robots to clean sludge and maintain and repair our equipment. If these new technologies are successfully developed, we plan to introduce them to a wider range of our plants. We strive to enhance our research and development capabilities so that we can continue to develop new technologies that are well-suited to our projects. We believe that innovation will lead to improved wastewater treatment, water supply, waste incineration and sludge treatment, and put us in a favorable position relative to our competitors.
Solidify our market leadership position and further expand market share in the water and solid waste industries.
The wastewater treatment industry in China is highly fragmented, with the top five players together accounting for only approximately 17.3% of the market. According to Frost & Sullivan, industry consolidation is expected to increase in the near future. We were the third largest municipal wastewater treatment operator in China in terms of total operation treatment capacity as of December 31, 2016 according to Frost & Sullivan. We strive to solidify our market leadership and further expand our market share in the PRC water and solid waste industries.
According to Frost & Sullivan, the demand for wastewater treatment, water supply, waste incineration and sludge treatment services is expected to continue to grow in China as a result of continuous urbanization and growing income per capita in our core markets. Our business model in the water and solid waste industries is mature and scalable. We have established brand awareness and solid industry experience in this market. These factors will put us in an advantageous position to capture new opportunities arising from the consolidation in the industry and increasing market demand. We intend to continue to promote our brand awareness, which we believe will strengthen our competitiveness.
We seek to expand our market share through organic growth as well as through acquisitions of local players in this industry. For existing projects, we plan to upgrade operational standards and increase capacity in accordance with the growing local needs. For new projects, we plan to closely follow the “Belt and Road Initiative” and government policies relating to environment protection in our acquisition strategy. We strive to enhance our market share and leadership in the PRC water and solid waste industries.
Expand across the environmental industry value chain and enter new industry sectors.
Already an established player in the wastewater treatment sector, we seek to expand across the environmental industry value chain by entering new industry sectors. The logical next step for a wastewater treatment company is to explore sludge treatment, because sludge is a by-product of the wastewater treatment process. In 2015, we entered the sludge treatment market after we invested through MTI Environment Group Limited. We then started conducting sludge treatment through our Wuhan Regional Headquarters and Longjiang Regional Headquarters in 2016. During the Track Record Period, our revenue derived from sludge treatment accounted for only a small portion of our business and has significant room for growth. We plan to conduct sludge treatment in our other regions in the future.
We also plan to pursue soil restoration as a new business line when we deem appropriate. Certain of our existing technologies used for sludge treatment, such as poisonous material decomposition, can also be applied to soil restoration with slight modifications. In addition, we are contemplating other related sectors, such as seawater desalination, renewable energy, water technology and pollution control. With an aim to cover more of the environmental industry value chain, we are committed to becoming an integrated operator in China’s environmental industry by offering comprehensive services.
Continue to evaluate and selectively pursue investments and acquisition opportunities in China and overseas.
Acquisitions have always been important to our success. To maintain the upward trajectory of our financial performance, we will continue to pursue our strategy of acquisition driven expansion. We will prudently evaluate potential targets and selectively pursue investments to supplement and complement our existing operations. Our experienced investment team is able to discern the projects that are in accordance with our existing project portfolio and overall strategy.
Domestically, we are exploring multiple potential projects. These projects include traditional wastewater treatment projects and waste incineration projects, as well as sludge treatment projects, which are relatively new to us. We also consider overseas targets in countries and regions that are covered by “The Belt and Road Initiative” when the opportunities arise. We believe that acquisitions of this kind may help us optimize our talent pool, enhance our technology, increase our product and service offerings and strengthen relationships with our business partners.
Continue to leverage the strong support from SIHL Holdings and explore strategic cooperation partnership opportunities.
We expect to continue to receive strong support from SIHL Holdings, which is a conglomerate engaging in a wide range of business activities. Many of its businesses are directly or indirectly related to the environmental industry. For example, SIHL Holdings engages in and has experience operating and managing renewable energy power generation businesses. Given our close relationship with SIHL Holdings, we have the opportunity to develop expertise in this industry. When this market becomes more mature, we believe our experience will place us in a favorable position to penetrate the renewable energy market. The background of SIHL Holdings and its strong network may also lead to strategic cooperation partnership opportunities with large-scale state-owned enterprises. We will continue to leverage the strong support from SIHL Holdings in facilitating our development.