Baoguang shares, formerly known as Shaanxi Baoguang Electrical Engineering General Factory, was listed on the Shanghai Stock Exchange in 2002. The actual controller of the company is China West Power Group, with a stake of 24.80%. Its main business is electrical devices and accessories, electronic ceramics, etc., and its main products are vacuum interrupters, sealed pole columns, etc., with a high market share. On the basis of the existing mature business, the company actively arranges the power grid frequency modulation business, which can effectively solve the problem of clean energy integration and consumption, and has broad prospects in the future. By the end of 2021Q3, the company's operating income during the period was 816 million yuan, + 33.17% compared with the same period last year, and the net profit was 33 million yuan, + 7.75% over the same period last year.
The mature business of the company is growing steadily. Vacuum interrupter is the core component of vacuum switch, which is mainly used in power transmission and distribution control system. The company has mastered a complete set of technology of vacuum interrupter from raw material production to whole pipe sealing and arrangement. it is one of the few enterprises in the domestic production of arc interrupter enterprises to process all the core parts independently, with a high market share. According to the 2020 annual report, direct material costs accounted for 88.03% of the arc extinguishing room. The prices of copper, silver and other raw materials rose sharply in 2021. As of December 3, the average spot prices of copper and silver rose 42.58% and 13.26% respectively compared with the same period last year. The profit space of the whole industry has been squeezed to varying degrees. Baoguang shares through meticulous management, the third quarter cumulative gross profit margin and net profit fell 5.08/0.95pct compared with 2020, home net profit + 7.75% year-on-year, sub-leading position. As upstream prices stabilize and fall, the company's profitability is expected to be further enhanced.
The normal operation of power system requires stable frequency. The 50Hz stability of power grid is one of the important signs of power quality, which is directly related to the normal operation of power drive equipment, and has a great impact on metallurgy, chemical industry, electronics industry, aerospace and other industries. When the installed capacity is above 3000MW, the allowable frequency fluctuation range is ±0.2Hz, the installed capacity is below 3000MW, and the allowable frequency fluctuation range is ±0.5Hz. It can be seen that the power grid frequency fluctuation range is narrow and the requirements are strict.
Clean energy is connected to the grid on a large scale, which greatly disturbs the frequency of the power grid. By September 2021, the installed capacity of clean energy (hydropower, nuclear, wind and solar) totaled 1.01 billion kilowatts, accounting for 44.1 percent of the total installed power capacity, an increase of about 3 percent over the same period last year. According to the Cundafeng action plan, the installed capacity of wind and solar power will reach more than 1.2 billion kilowatts in 2030. Wind power and photovoltaic are different from traditional electric energy, its force has the characteristics of randomness and intermittence, which will make the frequency of the power grid fluctuate and cause the decline of power quality. With the increasing proportion of clean energy on the Internet, it will have a certain impact on the regional power grid, impact on the stability of the power grid, make the power grid frequency fluctuate and even cause large-scale power outages.
The traditional frequency modulation method of power grid is not suitable for large-scale grid connection of clean energy. At present, the FM power supply in our country is mainly thermal power units, which can track the frequency change of the system by adjusting the active power output of the units. However, the response time delay of thermal power units is long, the climbing rate of thermal power units is low, and there are some phenomena, such as adjustment delay, adjustment deviation and adjustment reverse, and the frequent change of power operation will affect the operation life of the unit. At the same time, due to the limitation of geographical conditions, the overall FM capacity of hydropower units is limited.
Electrochemical energy storage is an effective way to maintain the stability of power grid frequency and solve the problem of clean energy consumption. Because of the flexibility of its own power huff and puff, the battery energy storage power station can well support the frequency regulation and voltage regulation auxiliary service of new energy grid connection, and can complete the AGC instruction within 2 seconds, which is about 60 times of the response speed of thermal power units. therefore, the comprehensive control strategy of grid-connected inverter of energy storage power station has attracted much attention and is an effective way to solve the pain point of clean energy grid connection. At the same time, on October 11, 2021, the national standard "Technical regulations and Test guidelines for Primary Frequency Modulation of Grid-connected Power supply" was officially issued and formally implemented on May 1, 2022. It is clear that energy storage power stations, wind power, photovoltaic and other grid-connected power supplies connected to 35kV and above must meet the technical specifications of primary frequency regulation. It has become a general trend for new energy power stations to have primary frequency modulation capability. with the release of the national standard of primary frequency modulation, the installation of energy storage system will become a necessary option, and frequency modulation capability will become a necessary "skill" for new energy stations.
Baoguang Power Grid FM business is operated by subsidiary Baoguang Zhizhong. Baoguang Zhizhong was established in March 2021, established by Baoguang (51%) and Tsinghua Zhizhong Energy Internet Research Institute (49%), led by senior academicians, with decades of research and development achievements, with independent research and development of energy storage EMS as the core, customers cover five major power generation groups, provide 1) thermal power plant energy storage frequency modulation project (EMC), there are 4 projects have been put into operation The main way of income is to participate in the auxiliary services of the power grid and share the income with the power plant. The IRR of the project is not less than 15%, which is the main revenue-generating force of the company in the future. 2) new energy + energy storage EPC project, complete sets of equipment supply; 3) energy storage new technology product research and development and consultation. Among them, the hardware part of the energy storage coordination controller and BMS is developed by the company itself, and the manufacturer is commissioned to do the OEM.
Investment suggestion
Grid frequency modulation is a necessary condition for large-scale grid connection of clean energy, electrochemical energy storage is hardware, and only hardware + software is the real solution. We believe that Baoguang shares, as an established central enterprise, has sufficient accumulation of technological research and development, and the subsidiary Baoguang Zhizhong United Tsinghua Research Institute has become a forerunner in solving the problem of clean energy integration and consumption, and there is a broad space for the future. We estimate that the operating income of the company from 2021 to 2023 is 993 million yuan, 1.184 billion yuan and 1.423 billion yuan respectively, and the net profit of returning mother is 52.45 million yuan, 94.79 million yuan and 140.64 million yuan respectively, corresponding to 104,57 and 39 times of PE.
Risk hint: clean energy development is not as expected; new business promotion is not as expected
