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Listing Fore: Greens Chairman Frank Ellis (left), with Hong Kong Chief Executive Donald Tsang and Greens COO Eva Chen prior to its listing on HKSE. Photo: Company

GREENS HOLDINGS Ltd (HK: 1318), a designer and manufacturer of heat transfer products and solutions for power station, industry, marine application and petro-chemical industries, is riding high on a 66% market share in the Chinese marketplace for key products.

This dominance has helped it achieve gross profit margin last year of 32%.

With China accounting for 64% of the Shanghai-based firm’s revenue last year and Beijing planning to spend billions of yuan over the next decade cleaning up its industries and environment, senior executives said in a meeting last week that Greens is well positioned to see impressive growth.

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Greens is quite a bargain now.
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Greens Holdings Ltd, part of UK-based Greens Holdings, operates as an investment holding company which engages in the supply of heat transfer products.

The company operates four segments: economizers, waste heat recovery products, waste heat power generation and boiler components.

The company is also making inroads into wind turbine towers, which does not involve heat transfer but is all about making energy generation cleaner, greener and leaner.

Greens: Making Coal Greener

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Day in the Sun: Shanghai-based Greens Holdings Ltd executives basking in their November 2009 listing in Hong Kong.
Photo: Company

Economizers are devices fitted to boilers (and other heat-generating equipment) which saves energy by using the exhaust gases from the boiler to preheat the cold water used to fill it.

Luckily for Greens Holdings, economizers have applications in coal-fired power plants, the source of some 70% of China’s electricity.

“There is a lot of room for our business growth in China. Emitting industries in China, particularly coal-fired generating plants, are committed to cutting emissions – and we can do a lot to help them,” Greens Chief Operating Officer Eva Chen told NextInsight, Aries Consulting and a group of Greater China fund managers last week.

Being a leading global supplier of heat transfer products gives Greens a definitive advantage in the world’s biggest net emitter of greenhouse gases – China.

   
Greens Holdings Ltd in hkd
Market cap 1.4 bln
Stock price 1.11
26-week range 1.11-2.34
2009 dividend 0.022
Dividend yield 2.00%
PE 13.5X
   

Beijing’s campaign to reduce overall energy consumption, and especially to cut down on the burning of coal (the most polluting form of electricity generation), is leading to the forced closure of hundreds of smaller non-compliant coal-fired plants with high emissions and coal consumption.

Their desire to stay on the right side of the law, and attempts by larger established power plants to meet stricter guidelines, means that there is a tremendous amount of demand in China for Greens’ economizers, waste heat recovery products, and boilers.

This is even more glaring a market opportunity for Greens given that revisions in the Law on Promoting Circular Economy explicitly states that “enterprises should utilize and recycle waste heat from production.”

It is likely for this very reason that Greens already enjoys a 66% market share in China for extended surface economizers, and a 38% share globally.

It also contributes to the firm’s whopping 64% of revenue coming from China last year with the EU’s contribution a distant second place at 21%.

Greens to the Rescue

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Greens hopes to ride a gust in wind farm construction.
Photo: Leong Chan Teik

“Our forte is in more efficient energy generation. And our products can be used in a wide variety of applications,” Ms. Chen said.

A quick glance at the company’s introductory pamphlet says as much.

Its second most lucrative category -- waste heat recovery products --supplies HRSG products for applications in CCGT plants and combined heat and power plants; and waste heat boilers, which generate steam for heat or process use or for power generation in conjunction with steam engines.

The product segment focuses on producing and selling electricity generated from the waste heat, potential energy which would ordinarily be casually released untapped into the surrounding environment.

Ms. Chen is quick to point out that Greens Holdings Ltd is in no way overexposed to any one single product category, and the market is allowing the company to drift away from overreliance on its core product – economizers.

Hard Boiled

One category in particular is increasingly evincing signs of boiling over.

Greens boiler components segment offers various boiler components including air pre-heaters, superheaters, pressure vessels, steam drums, boiler furnace walls, and other components, such as power station steel structures and finned tubes, as well as membrane walls, steam drums, reheaters, and headers.

In fact, in 2009 revenue for this product segment jumped 170% to nearly 106 mln yuan, second only to economizers and waste hear recovery products in terms of revenue contribution.

But there were winds of change blowing across China, especially as concerns the environmental impact of various ways of generating power.

And Greens Holdings Ltd was ahead of the game.

“In addition, through a joint venture with (China-based) Tongliao Boiler Factory Limited, we engage in the wind turbine towers manufacturing and sale business,” Ms. Chen added.

   
Greens Holdings 2009 2008 % change
Revenue (yuan) 555.4 mln 431.1 mln +29%
Gross profit 179.8 mln 109.8 mln +64%
Net profit 68.3 mln 60.1 mln +14%
EPS (basic) 0.072 0.078 (-7.7%)
   

She also offered some visibility on where the company was headed financially this year, after growing revenue by 29% last year to 555.4 mln yuan, with capacity utilization in 2009 reaching an impressive 70%.

“Last year, 2009 steel costs fell around 20-30% and therefore our margins were protected as 66% of our costs are for steel. We use many ways to soften impact from rising steel prices,” Ms. Chen added.

“However, as for a forecast for this year, it is quite hard to do because one or two major orders can make a huge difference.”

See also: ECOGREEN: Boosting production capacity 50% with new technology

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