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RETO Eco-Solutions: A Front Row Seat To China's Green Construction Boom

Pinxter Analytics profile picture
Pinxter Analytics
4.98K Followers

Summary

  • As China moves to environmentally-friendly manufacturing and construction, market growth is seen to outpace broader market and offer a compelling investment opportunity.
  • With RETO Eco-Solutions patented products, manufactured with higher energy efficiency and lower overall emissions, sales have grown by a near triple-digit rate in recent years.
  • With the continued investment in environmentally-friendly manufacturing by leading and emerging global economies, the company offers great exposure to the shift in government and consumer infrastructure spending around the world.
  • A look at the company's financials and growth prospects brings me to believe it is undervalued by as much as 35% for 2018, and a long-term investment can yield high returns.

Investment Thesis

China has been an economic growth engine for quite some time, even as it's been at the expense of the environment. In recent years, as evident with its five-year action plan (chapter 32) released in 2015, the world's number one air and water polluter vowed to clean up its act and shift all public buildings and resources to become environmentally friendly and energy efficient.

As the economic boom continued, the country invested heavily in infrastructure and construction to complement the growing population and urbanization plans put in place a few years earlier. This resulted in a boom in green construction demand in recent years, in which RETO Eco-Solutions (NASDAQ:RETO) is one.

As the industry is set to grow at a high single-digit rate through 2021, the company is enjoying market share capture as they emerge as a strong player that offers a wide array of manufacturing equipment and construction materials which are done in an environmentally friendly manner using less energy and near-zero pollution. As a result, the company has grown sales 87% in the most recent year and 11% in H1 of 2017, outpacing industry-wide growth rates, and is set to continue this outperformance as it introduces its patented products in more regions where the government is investing heavily and in other areas around the world.

Looking into the company's current revenue streams and the potential it has in the Asia-Pacific region, the Middle East and Africa, I believe it is only getting started, and a long-term investment in the company is a solid avenue of exposure to the global shift to environmentally-friendly construction and manufacturing, and a valuation of the company based on expected 2017 and 2018 financials predicts a significant price appreciation potential over the next year.

The Industry: Heightened Demand in the Five-Year Plan

This article was written by

Pinxter Analytics profile picture
4.98K Followers
As part of my earnings growth strategy, I invest, trade and write about small under-covered growth companies which don't get much attention from establishment analysts as well as use the strategy to interpret short and long term moves in bigger, well established companies in the United States, Europe and the Asia-Pacific region.-All articles and the information in them are my opinion based on my own research and analysis and should not be taken as investment advice without proper due diligence and advice from a professional financial adviser.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in RETO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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