(Reprinted from Times Finance)
With 36 years of development, China LESSO has established a strategic "core + multi-wing" business layout.
Extending core businesses for synergistic growth has become a key strategic direction for many industry leaders. By adopting horizontal or vertical integration, enterprises can leverage their accumulated advantages in core operations to expand into new sectors, achieving powerful synergies and sustainable growth.
As a leading plastic piping manufacturer headquartered in Foshan—a hub of China's manufacturing industry—China LESSO (2128.HK) has undoubtedly taken a pioneering role in implementing this synergistic strategy.
Today, the company has formed a "core + multi-wing" strategic layout. While consolidating its leadership in the piping sector, LESSO has expanded into high-potential segments such as waterproofing and fresh air systems, leveraging its resources in capital, talent, distribution, branding, and customer networks. This approach enables resource sharing and low-cost expansion, with increasingly evident synergies promising strong future performance growth.
Infrastructure Push and Rooftop PV Boom Drive New Opportunities in Waterproofing
As year-end approached, the central government reiterated its commitment to stabilizing growth, with infrastructure being a major focus.
The recently released Government Work Report emphasized placing steady growth in a more prominent position, launching major projects (including new infrastructure and renovations of aging public facilities), and actively expanding effective investments aligned with national strategies and the 14th Five-Year Plan, including moderately front-loaded infrastructure investments.
Local government work reports also frequently highlighted "new infrastructure" such as 5G base stations, intercity high-speed rail, and big data centers. Compared to traditional infrastructure, new infrastructure covers broader fields, exerts stronger economic ripple effects, and serves as a crucial pillar for expanding effective investments.
A flagship project—the "East Data West Computing" initiative—has drawn significant attention. Launched on February 17, this national strategy involves building eight national computing hubs and ten data center clusters across regions like Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Greater Bay Area. With an estimated annual investment of nearly ¥400 billion, spanning civil engineering, ICT, basic software, and green energy, this project is set to become another national-level endeavor following initiatives like the South-North Water Diversion and West-East Power Transmission, driving immense industrial chain effects.
The waterproofing industry stands as a major beneficiary. Waterproofing materials, including membranes and coatings, are widely used in residential, industrial, and commercial buildings (e.g., data centers, 5G base stations) to prevent leaks. Against the backdrop of steady growth and infrastructure expansion, the sector is poised for a new wave of opportunities.
Urban renewal and real estate investments further amplify demand. The State Council's Guidelines on Urban Renewal aim to renovate 1.7 billion square meters of pre-2000 housing by 2025, while the Government Work Report calls for orderly urban renewal. Building renovations inevitably require waterproofing upgrades, creating massive demand for high-quality materials.
Meanwhile, the Central Economic Work Conference signaled stabilizing property market policies, with 66 real estate easing measures introduced in January 2022 alone. As the sector stabilizes, demand for waterproofing materials will grow steadily.
The low-carbon economy also unlocks new potential. With buildings accounting for significant energy consumption and emissions, rooftop photovoltaics (PV)—particularly BAPV (building-applied PV) and BIPV (building-integrated PV)—are gaining traction. Waterproofing is critical for PV projects, with polymer membranes like TPO and PVC being ideal due to their performance. According to CITIC Securities, rooftop PV could add ¥13.1 billion annually to the waterproofing membrane market from 2022 to 2025.
As a major building materials group, LESSO has actively expanded into waterproofing. After entering the home waterproofing market in 2017, it acquired Zhongyou Jiahui in May 2021 to strengthen its position.
This expansion aligns with LESSO's strategy of leveraging synergies. Waterproofing applications—covering buildings, infrastructure, industrial plants, and commercial properties—overlap significantly with its core piping business, allowing LESSO to share resources and achieve low-cost scaling.
Zhongyou Jiahui, a zero-waste, vertically integrated specialist, offers waterproofing solutions for municipal, residential, and PV applications. Its JH-P500 TPO membrane is particularly competitive in the PV sector.
With vast opportunities in infrastructure, urban renewal, real estate, and PV, LESSO's foray into waterproofing promises new profit drivers and long-term growth.
Expanding into Water, Electricity, Air, and Heat: LESSO Targets the Billion-Dollar Fresh Air Market
LESSO's expansion logic is clear: it focuses on water, electricity, air (wind), and heat—essential areas for livelihoods. While piping and waterproofing relate to water, electrical conduits and gas pipelines cover electricity and heat, respectively.
In the air (ventilation) sector, LESSO acquired Holl Fresh Air, a leading fresh air system provider, to offer integrated solutions and build a synergistic business matrix.
Like waterproofing, fresh air systems align with LESSO's existing distribution channels and client base, enabling resource sharing. Founded in 2005, Holl is a high-tech firm with nearly 100 R&D staff, 70+ patents, and six core technologies (e.g., filtration, energy efficiency). Its product lineup includes wall-mounted, cabinet, and centralized systems for homes, schools, offices, and hospitals. Holl has also contributed to national standards like Ventilation System Air Purification Devices and School Air Quality Standards.
Market potential is immense. Fresh air systems, which filter outdoor air while exhausting indoor pollutants, are gaining traction due to COVID-19, consumer upgrades, and carbon neutrality goals.
Regulations further drive adoption. Recent policies mandate stricter ventilation standards for buildings and schools. For example:
The 2020 COVID-19 Prevention Guidelines for Schools required enhanced ventilation and safe airflow.
Beijing's 2021 Residential Design Standards recommended hybrid natural/mechanical ventilation and pre-installation provisions for fresh air systems.
- Outlook: Synergistic Growth Anchors Sustainable Performance
Huachuang Securities notes that, as seen in Western markets, regulations are key catalysts for fresh air system adoption, while air pollution and energy efficiency underpin demand. In China, rising incomes, pollution concerns, and new building standards are accelerating growth.
While overseas penetration rates rival household appliances, China's fresh air market remains nascent but poised for explosive growth. Ovi Cloud predicts the market could approach ¥100 billion by 2025.
Entering 2022, infrastructure investments, consumer upgrades, and green development are fueling economic momentum. LESSO's strategy—deepening its core business while expanding synergistically into waterproofing and fresh air systems—promises diversified profit streams and sustainable growth.
As a piping leader venturing into emerging sectors, LESSO is poised to reshape industries, accelerate consolidation, and reinforce its dominance. The era of "the strong getting stronger" is just beginning.
