2 trillion yuan of investment in hydropower energy storage infrastructure.

On June 13, the chairman of China Power Construction published an article on People's Daily, proposing that China will build a 270GW pumped storage project during the 14th five-year Plan period. Normally, water storage and energy storage projects take about 8 years to complete, and we estimate that China's pumped storage capacity will reach 216GW by 2030.

We think this is a leap in investment in hydropower infrastructure because the previous goal is to reach 122GW by 2030 (set by the Energy Administration nine months ago). We estimate that the 270GW pumped storage project will cost 2 trillion yuan (about 7 billion yuan per GW).

The two power equipment manufacturers will share the market of 400 billion yuan.

We estimate that electrical equipment accounts for 20% of the total investment, equivalent to a market of 400 billion yuan. In 2021, Dongfang Electric and Harbin Electric accounted for 40% and 50% of the market share of pumped storage generators respectively. We believe that Dongfang Electric and Harbin Electric will share this 400 billion yuan market in the next four years.

Our first choice is Dongfang Electric.

The acceleration of water storage and energy storage projects will further boost Dongfang Electric's performance. In addition to water storage and energy storage, Tepco's wind power and nuclear power equipment will also achieve strong growth in the next five years. In view of the large-scale infrastructure investment and the high certainty of revenue, we consider Dongfang Electric's valuation (9x FY22E pact E) to be very attractive and long positions.