Trash is cash — at least for investors in China’s environment sector.

Garbage treatment and recycling-related stocks are rallying, revived by new guidelines requiring more stringent sorting and waste treatment in large cities.

Kitchen waste treatment company WELLE Environmental Co. is on track for a record two-day gain, rising 18%. Refuse vehicle maker Fujian Longma Environmental Sanitation Equipment Co. is heading for a 32% advance over the past five days, while recycling enterprise Tus-Sound Environmental Resources Co. is up 16% this week.

Analysts say the sudden gains are more than just speculative as the fate of the environmental protection industry depends on policies.

The most prominent theme in the guidelines issued last week is a drive to better separate wet from dry waste, spurring demand for equipment with better seepage prevention, said Liang Chen, analyst at China Development Bank Securities Co. in Beijing.

This would benefit garbage treatment equipment companies while helping incineration businesses as segregating wet garbage will increase burning efficiency, she said. In addition, recycling businesses will save costs in the sorting process, she said.

"The industry is still awaiting clearer guidelines on a local level," Liang said. "But investors are clearly getting excited after share prices have been in the doldrums for so long."

Related: China’s Efforts to Promote Garbage-Sorting Have Gone to Waste