Good News on Listing | Frost & Sullivan Assists Shanghai Hui Ge Environmental Protection Technology Group Co., Ltd. in Successful Listing in Hong Kong (2613.HK)

Shanghai Hui Ge Environmental Protection Technology Group Co., Ltd. (hereinafter referred to as 'Hui Ge Environmental Protection') successfully went public on January 9, 2025. The company plans to issue 10,000,000 shares, of which 9,000,000 shares will be for international sale and 1,000,000 shares will be for public sale. The issue price per share ranges from HK$31.8 to HK$39.8, with a maximum net raise of approximately HK$398 million.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the issuer's competitive advantages, assisting the issuer, investment banks and other intermediaries in completing the writing of relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

• The company started operations in 2017 and launched its first product, the ship exhaust gas purification system.

   

• The company has developed and commercialized a variety of ship environmental protection equipment and systems;

   

• The company's equipment and systems are designed to help customers (such as shipowners) reduce sulfur and GHG emissions;

   

• The company aims to improve the living conditions on board and enhance maritime operations by providing internal design and supplying equipment and systems, with the intention of helping customers improve the quality of life for their crew.

According to the Frost & Sullivan report, the company:

As of December 31, 2023, ranked third among Chinese ship exhaust gas purification system providers and fourth among all global ship exhaust gas purification system providers, based on the total number of completed orders for the year 2023 and the cumulative outstanding orders.

The global maritime vessel market is a diversified industry that encompasses the design, manufacture, operation, maintenance, and marine protection of various commercial and other vessels, playing a crucial role in supporting logistics, energy transportation, manufacturing, and tourism. Countries around the world have recognized its importance and are actively implementing policies and regulations to promote technological upgrading and environmental transformation in maritime vessel manufacturing. The goal is to establish a modern shipping system that promotes sustainable development by balancing economic growth with ecological protection.

Maritime transportation is the most important downstream application of maritime vessels and the primary mode of transport in international logistics. In 2023, maritime transportation accounted for more than 80% of the total international trade cargo transport volume. Due to the stable growth of shipping capacity and international trade demand, the total number of active maritime vessels in the world has steadily increased from 93,518 in 2017 to 106,715 in 2023, achieving an average annual compound growth rate of 2.2%. Looking ahead, this upward trend is expected to accelerate from 2023 to 2028, with the total number of active maritime vessels in the world expected to reach 120,310 in 2028, with an average annual compound growth rate of 2.4%.

Global Active Maritime Vessels (Estimated) 2027 - 2028

From 2017 to 2023, the global new construction of maritime vessels showed a slight fluctuating upward trend. From 2017 to 2019, stricter environmental regulations and previous fleet expansions led to fluctuations in new ship demand. From 2020 to 2022, the recurrence of the COVID-19 pandemic caused intermittent shutdowns and production halts in various countries, resulting in fluctuations in new ship deliveries during this period. However, from 2023 to 2028, global new construction of maritime vessels is expected to recover and grow significantly from 1,598 ships to 3,107 ships at an average annual compound growth rate of 14.2%. Factors driving this growth include post-pandemic recovery, rising global trade demand, advancements in shipbuilding technology, and increased investment in ships equipped with environmental protection equipment and systems to meet regulatory and efficiency standards.

Global new maritime vessel construction from 2019 to 2028 (estimated)

Definition and Classification of Ship Environmental Protection Equipment and Systems

International shipping (accounting for over 80% of global transport trade volume) is facing increasing environmental challenges. Traditional fossil fuels emit harmful substances such as sulfur oxides, nitrogen oxides, and suspended particulate matter, which have a significant impact on air quality and human health. To address this situation, the international community and countries around the world have formulated stricter environmental protection conventions and standards for the shipping industry, increasing emission requirements. For example, the strict requirements of the International Maritime Organization have increased environmental protection and time pressures on shipbuilding and ship modification industries, leading to an increase in demand for ship environmental protection equipment and systems. Ship environmental protection equipment and systems effectively meet customer needs through rapid response, comprehensive services, and innovative technology, thereby improving the efficiency and quality of ships.

At the same time, ship-related environmental technologies are developing rapidly, with new generations of energy-saving and emission-reduction technologies, as well as efficient equipment and systems emerging continuously. By optimizing ship design, retrofitting energy and power systems, implementing intelligent ship operation management systems, and utilizing clean energy, these innovative measures enhance the sustainable development and competitiveness of the maritime ship industry. Ship environmental protection equipment and systems focus on advanced technology and environmental transformation, covering the entire lifecycle of ships from design and manufacturing to operation and recycling. These equipment and systems effectively achieve their intended functions and performance, improve energy efficiency, reduce or eliminate environmental pollution, and provide an excellent working environment for operators and users, leading the industry towards more sustainable development.

Based on the development history of industry environmental protection requirements led by the International Maritime Organization, ship environmental protection equipment and systems can be divided into four areas:

&bull> Ship desulfurization system (EGCS)Refers to the installation of key environmental protection equipment on maritime vessels, which harmlessly treats exhaust gases from the main engine, generator, boiler, and other sources. This can prevent air pollution caused by uncontrolled ship emissions and help shipowners and operators comply with international maritime organizations and national environmental protection regulations. Increasing ship exhaust gas purification systems is currently the main and most cost-effective method for reducing sulfur oxides. By selecting the appropriate type of ship exhaust gas purification system (including open, closed, and hybrid systems), and ensuring scientific design, installation, and maintenance, significant reductions in ship sulfur oxide emissions can be achieved to protect the atmospheric environment. In addition, effective cost management and operational training ensure optimal economic and environmental benefits throughout the entire maritime vessel lifecycle.

&bull> Ship Energy-saving DevicesIntegrate energy-saving equipment, carbon capture, utilization, and storage systems (including organic alcohol ammonia carbon capture systems and dual-alkali carbon capture systems), as well as intelligent control technology, to optimize power performance, reduce fuel consumption, and lower emissions. This comprehensive approach improves the operational efficiency and environmental performance of ships, enabling shipowners and operators to reduce operating costs while complying with international and regional environmental regulations.

&bull> Marine Clean Energy Supply SystemIt covers the use of clean energy supply systems and related equipment, including but not limited to dual-fuel gas supply systems (FGSS) using liquefied natural gas (LNG)/liquefied ethylene gas (LEG), low-flash-point fuel supply systems (LFSS) using methanol/Liquefied Petroleum Gas (LPG)/ammonia, and liquid cargo systems (CHS) using liquefied natural gas/Liquefied Petroleum Gas/ammonia/Liquid Carbon Dioxide (LCO2). These systems aim to reduce emissions from ship combustion of fossil fuels by replacing traditional petroleum with clean energy, thereby reducing carbon emissions and air pollution.

• Marine services and othersIt covers ship interior fittings, ship network security software and hardware, ship modification and repair supervision services, container ships, PCTC fasteners, etc., with a focus on ship environmental protection.

Value Chain Analysis of the Global Ship Environmental Protection Equipment and Systems Industry

The ship environmental protection equipment and systems industry has a fully integrated value chain, covering multiple stages and various participants focused on developing and implementing environmentally friendly ship technologies.

The upstream industry relies on raw material suppliers that provide basic components such as stainless steel and key equipment, as well as suppliers of components for products related to ship environmental protection equipment and systems. In the midstream industry, ship environmental protection equipment and system providers offer a range of products and services, including research and development and design, manufacturing and procurement, installation, commissioning and maintenance, sales and marketing, as well as technical consulting. In the ship environmental protection equipment and system industry, in addition to internal sales and marketing teams, hiring sales agents is a common practice because ship environmental protection equipment and system suppliers can promptly perceive market demand and accelerate the contracting process.

In addition, generally speaking, sales agents have a closer relationship with shipowners or shipbuilders, which helps them penetrate specific markets where suppliers have not yet established relationships or within the shipowner or shipbuilder networks. In the downstream industry, shipowners and shipbuilders cooperate with providers of ship environmental protection equipment and systems to integrate these customized and cost-effective equipment and systems into new ships or modified existing ships to meet environmental standards and improve efficiency. The following describes the value chain of the ship environmental protection equipment and systems industry:

Global market scale of ship environmental protection equipment and systems

From 2016 to 2021, the International Maritime Organization (IMO) proposed and set global limits on sulfur oxides content in ship fuel, and issued the 'GHG Strategy', aiming to achieve net-zero GHG emissions from the maritime industry around 2050. These measures, as key catalysts, have accelerated the development of the global green shipbuilding industry.

As a major component, the ship desulfurization system market has dominated the global ship environmental protection equipment and systems market over the past five years, accounting for about 50% of the industry in 2023 and is expected to remain the largest segment from 2024 to 2028. From 2017 to 2020, the main driver of the global ship desulfurization system market was the desulfurization regulations announced by the International Maritime Organization in 2016 and implemented in 2020, which prompted many shipowners to install ship exhaust gas purification systems on new and converted ships. This led to a surge in demand for ship desulfurization systems during this period, with the market size increasing from $1.365 billion in 2017 to $37.764 billion in 2020, and its market share in the ship environmental protection equipment and systems industry rising from 18.1% to 81.6%. However, factors such as labor shortages due to COVID-19, container shortages, supply chain disruptions, and increased cargo demand significantly increased shipping prices from 2021 to 2022, indirectly reducing shipowners' willingness to stop operating and installing ship exhaust gas purification systems. As a result, the market size of the ship desulfurization system industry in 2022 dropped to $11.378 billion, leading to a decline in the overall global ship environmental protection equipment and systems market. With the impact of the pandemic subsiding and supply chains recovering, the market size is expected to rebound starting from 2023, reaching $42.830 billion by 2028, with an average annual compound growth rate of 22.6% from 2023 to 2028.

Due to increasingly stringent international regulations and growing environmental concerns, the demand for ship energy-saving devices and ship clean energy supply systems will also rise significantly. Technological progress, economic incentives, and financial support make these equipment and systems more attractive, prompting many companies to invest to comply with regulations, reduce costs, and enhance their competitiveness. It is estimated that ship energy-saving devices and ship clean energy supply systems will reach $26.861 billion and $24.27 billion respectively by 2028. At the same time, the market share of these segments is expected to increase from 10.2% and 11.1% in 2023 to 23.6% and 21.3% in 2028, providing strong support for the development of the ship environmental protection equipment and systems industry. Driven by these factors, the global ship environmental protection equipment and systems industry is expected to reach $113.841 billion by 2028, with an average annual compound growth rate of 29.7% from 2023 to 2028.

Market Size of Ship Environmental Protection Equipment and Systems by Revenue (Segmented by Region) from 2017 to 2028 (Estimated)

The ship exhaust gas purification system is an important means of complying with international maritime organization and regional regulations on sulfur oxides emissions from ships. It provides stable economic benefits, can be installed directly, and has a relatively short payback period compared to the fluctuating price gap between high-sulfur and low-sulfur fuels. Therefore, since the International Maritime Organization first proposed global sulfur oxide emission limits in 2016, the number of ships equipped with ship exhaust gas purification systems has increased significantly worldwide. The total number of maritime vessels equipped with EGCS consists of two parts: (i) the number of new ships equipped with EGCS, and (ii) the number of existing maritime vessels undergoing retrofitting to be equipped with EGCS. These two factors together drive the growth in market demand for EGCS.

The global increase in new maritime vessels equipped with EGCS has risen from 26 in 2017 to 227 in 2023, with an average annual compound growth rate of 43.5%. Looking ahead, in the new ship sector, the global shift towards green shipping activities has made it more common for shipbuilders to incorporate desulfurization systems into ship design from the outset. With international maritime organization sulfur oxide emission limits and expected further regulation, this has encouraged shipowners to address this issue early when ordering new ships, leading to a stable demand for the installation of desulfurization systems on new vessels.

In the modification market, the cumulative number of modified maritime vessels equipped with EGCS has increased mainly due to two factors: high fuel costs and increasingly stringent environmental regulations. The continuous rise in the prices of high-sulfur and low-sulfur fuels has made the use of desulfurization systems economically advantageous. In addition, in 2022, as the impact of the pandemic weakened and shipping prices stabilized, freight rates began to fall, but they were still higher than before the pandemic and shipping capacity was no longer in extreme shortage. However, in 2023, freight rates subsequently rose due to factors such as the Red Sea crisis. Many shipowners have accumulated funds during the period of high freight rates since 2020 and are currently focusing on upgrading their fleets to comply with increasingly stringent environmental regulations. As it is necessary to meet stricter emission standards while controlling fuel costs, the number of modified maritime vessels equipped with EGCS is expected to increase. In addition, due to accumulated funds, shipowners will continue to place new ship orders to meet the needs of the next cycle.

Therefore, the global new construction and cumulative modification of maritime vessels equipped with ship exhaust gas purification systems will reach 932 and 7,832 vessels in 2028 respectively, with an average annual compound growth rate of 32.6% and 15.6% starting from 2023, thereby promoting industrial upgrading and facilitating the desulfurization development of traditional shipping activities.

Number of new and cumulative conversions of maritime vessels equipped with ship desulfurization systems from 2017 to 2028 (estimated)

Market Drivers and Trends of the Global Ship Environmental Protection Equipment and Systems Market

• Regulatory and standard enhancement

The increasing global emphasis on environmental protection is an important driving force for the ship environmental protection equipment and systems industry. Due to the implementation of stricter environmental regulations and standards, the shipping industry is forced to adopt cleaner energy solutions.

From the perspective of ship desulfurization:

Regulations and standards related to ship desulfurization have undergone significant evolution driven by environmental issues and regulatory frameworks. Since January 1, 2010, the EU has mandated that ships anchored for more than two hours at EU ports use low sulfur fuels with a sulfur content not exceeding 0.1%, aiming to reduce sulfur oxide emissions in port areas. In October 2016, the International Maritime Organization further decided that starting from 2020, a global sulfur oxide limit of 0.5% will apply to ships operating outside sulfur oxide emission control areas (ECA). This regulation has stimulated the entire ship industry to adopt low sulfur fuels and desulfurization technologies (such as EGC systems), marking a significant shift towards ship environmental protection equipment and systems to comply with global environmental standards.

Countries around the world have actively responded to the regulations of the International Maritime Organization with their own measures. For example, the South Korean 'Special Act on the Improvement of Air Quality in Port Areas', which came into effect on January 1, 2020, implements a sulfur oxide limit of 0.1% and voluntary speed reduction. The Ministry of Transport of China has also stipulated that ships in emission control areas shall use fuel with a sulfur oxide content not exceeding 0.5% starting from January 1, 2019, 0.1% starting from January 1, 2020, and stricter controls in specific areas starting from January 1, 2022. These may be implemented nationwide by January 1, 2025.

From the perspective of ship carbon reduction:

The 76th session of the Marine Environment Protection Committee, held in 2021, introduced technical and operational measures that will come into effect in 2023, aiming to reduce the carbon intensity of international shipping. These measures include implementing the existing Energy Efficiency Index (EEXI) for ships, strengthening Ship Energy Efficiency Management Plans (SEEMP), emphasizing the Energy Efficiency Design Index (EEDI), and establishing a Carbon Intensity Indicator (CII) rating scheme. The CII system stipulates that ships calculate and compare their carbon density performance against established standards, encouraging operational efficiency and providing competitive advantages for ships with higher ratings. Ships with lower ratings must improve their energy management activities. The increase in the carbon density reduction factor aims to significantly reduce the overall carbon density of the global fleet of maritime vessels.

In addition, the International Maritime Organization's 'Strategy for Reducing GHG Emissions from Ships', adopted in 2023, sets ambitious goals, including reducing greenhouse gas emissions by 40% from 2008 levels by 2030 and achieving net-zero emissions around 2050. Furthermore, the European Union Emissions Trading System (EU ETS) has been extended to the shipping industry since January 2024, requiring companies operating within the EU to gradually pay carbon emission fees, with full charges applied by 2026. These regulatory advancements reflect the shipping industry's comprehensive efforts to align with strict environmental goals and global emission reduction strategies. These policies encourage investment in ship desulfurization and decarbonization, encourage shipowners to adopt ship environmental protection equipment and systems, and promote a cleaner and more sustainable maritime industry.

• >Technological innovation improves economic efficiency

To address the International Maritime Organization's sulfur oxide emission limits, the installation of ship exhaust gas purification systems can achieve maximum economic benefits due to cost control and consideration of the current operational performance of ships. With countries around the world setting dual carbon targets and the International Maritime Organization launching the 'GHG Strategy', controlling ship sulfur oxide emissions is no longer sufficient to meet current environmental regulations. The importance of ship decarbonization is becoming increasingly prominent. To comply with the International Maritime Organization's GHG emission targets, shipowners can consider adopting ship energy-saving devices or ship clean energy supply systems. These equipment and systems help reduce carbon taxes and transaction payments. Although the installation cost is currently high, they are in line with the International Maritime Organization's GHG emission strategy in the long run.

Energy-saving and carbon-reduction technologies (such as propeller optimization systems, wind deflectors, and ship photovoltaic systems) offer various options to reduce energy consumption and emissions. Continuous progress in these areas is driving the development of efficient equipment and systems, while carbon capture technologies are also being enhanced to effectively capture and store carbon dioxide. However, these measures alone are not sufficient to achieve the International Maritime Organization's goal of net-zero emissions by 2050. Ship clean energy supply systems involve sustainable technologies such as liquefied natural gas (LNG), liquefied petroleum gas (LPG), methanol, and clean energy for ammonia production. Due to high equipment and construction costs, they are currently less adopted. Most ships focus on long-term carbon reduction energy-saving measures. With stricter GHG emission regulations, advancements in clean energy technologies, and cost reductions, it is expected that clean energy supply systems will become the main approach for future ship environmental protection equipment and systems.

• Replacement of high-quality domestic products

In recent years, China has developed a comprehensive industrial value chain and demonstrated an outstanding cost advantage compared to foreign competitors. Leading Chinese enterprises now exhibit strong and stable delivery and project management capabilities. As a result, their products are increasingly installed on a wider range of ships, with performance quickly validated and gaining customer trust. Turnkey engineering services also meet customers' one-stop service needs, enabling these companies to establish global service networks. In 2023, three out of the world's top ten ship exhaust gas purification system providers were Chinese companies based on completed and in-hand orders. With Chinese companies deepening customized and integrated cooperation with shipowners, as well as the continuous growth in ship decarbonization demand, it is expected that high-quality domestic products will expand their market share. With factors such as superior performance, energy-saving effects, comprehensive equipment and systems, efficient construction periods, longer service life, and higher overall project value continuing to strengthen, it is anticipated that product deliveries and new orders for high-quality domestic products will continue to grow. This will accelerate the pace of domestic substitution and enhance the competitive edge of Chinese enterprises in the global market.

competitive landscape

Since 2019, the ship desulfurization system market has always been the largest segment of the global ship environmental protection equipment and systems market, accounting for nearly 50% in 2023. Therefore, competition in the global ship environmental protection equipment and systems market mainly revolves around the ship desulfurization system segment. Currently, the global ship desulfurization system market is highly fragmented, with about 60 to 70 companies worldwide capable of providing ship exhaust gas purification systems. Our group is one of the few companies that offer comprehensive, customized ship environmental protection equipment and systems.

During 2023, the number of completed and outstanding orders for global ship exhaust gas purification systems reached a total of 985. The top ten practitioners collectively account for about 52.5% of the market share. The Group has received 57 orders and ranks fourth in the global market for ship environmental protection equipment and systems.

Top 10 Global Ship Exhaust Gas Purification System Providers for 2023

The global maritime services market is highly fragmented, with thousands of companies providing a wide range of services, making it difficult to form clear competitive barriers. Most companies focus on providing one or two specialized maritime services, leading to a highly dispersed competitive landscape. In contrast, the market for ship environmental protection equipment and systems is relatively specialized, with only a small number of global suppliers capable of providing both equipment and systems (such as EGCS and clean energy supply systems) as well as maritime services. Among the 90 to 100 companies providing environmental protection equipment and systems, only 30 to 35 can provide both, making this segment of the ship service market more concentrated. In 2023, based on the revenue from maritime services in 2023, our group ranked third among the 30 to 35 companies that provided both global ship environmental protection equipment and systems as well as maritime services. Our group's revenue from maritime services in 2023 was RMB 100 million, with a market share of 1.7%.

Top three maritime service providers (by revenue) in the global ship environmental protection equipment and systems market in 2023

Compared with overseas companies, Chinese companies have been established for a shorter time but have rapidly occupied significant market shares. This is attributed to several factors. As the world's leading shipbuilding country, China has a complete industrial chain that has improved the production efficiency of desulfurization systems. Since 2019, China has become the world's largest shipbuilding market, accounting for more than 65% of global new orders by tonnage in 2023. This strong supply chain enables Chinese companies to surpass foreign competitors in terms of production efficiency, pricing, and after-sales service. On average, the cost of desulfurization systems for Chinese companies is 20% to 30% lower than that of foreign companies, and the price gap for complex systems on large-tonnage ships is even greater. In addition, Chinese companies perform excellently in terms of delivery speed, usually leading international competitors by two months, thanks to their well-equipped teams.