The company is a leading domestic energy equipment manufacturer, thermal power, pumping, nuclear power and other core equipment ushered in the boom, promoting performance growth. The company's coal-fired power units account for 1x3 of the total domestic installed capacity, large hydropower units account for 1x2 of the total domestic installed capacity, heavy gas turbines account for 1x3 of the domestic market share, and nuclear power units account for 1x5 of the total domestic equipment.
1) Thermal power: the supply-side reform of the 13th five-year Plan resulted in a significant decline in the number of new coal-fired power units, affecting the company's thermal power and auxiliary business. During the 14th five-year Plan period, the shortage of power supply reappears, the role of coal power "bottom protection" is highlighted, coal power is expected to usher in a new round of construction cycle, we expect to install 200GW in the 14th five-year Plan, the company as the three major mainframe manufacturers is expected to directly benefit the growth of the industry.
2) pumping: up to 62GW in 2025 and 120GW in 2030. The company has the first market share of pumping and storage turbine generators in the country (43%), which will directly benefit from the high growth of the industry.
3) Gas and electricity: gas and electricity is a high-quality peak regulation resource, and the development of gas and electricity is expected to accelerate during the "14th five-year Plan" period. The company is one of the three major manufacturers of heavy gas turbines, and the scale of gas and electricity installation is expected to increase.
4) Nuclear power: the speed of approval of nuclear power projects under the dual-carbon policy is accelerated, and an average of 7-8 nuclear power units are expected to be approved in 2021-2035, double the number approved during the 13th five-year Plan period, of which 10 new nuclear power units have been achieved in 2022. The company is expected to benefit as a major domestic nuclear power supplier.
The project of the power station has stopped falling and rebounded, and the service of the power plant has benefited from the acceleration of the linkage of coal and electricity. The company's power plant engineering business is mainly overseas projects, which has declined sharply in recent years due to the epidemic, the sharp rise in raw material prices and the influence of international coal and power policies. The company actively seeks transformation to gas-power combined cycle, hydropower, biomass power generation and new industrial general contracting. The amount of overseas contracts signed in 2021 is 5.874 billion yuan, a substantial increase of 428.19% over the same period last year. In terms of power station services, benefiting from the linkage of coal and power reform, the company, as a major equipment supplier, can give priority to providing services such as corresponding flexibility transformation and energy saving and consumption reduction transformation.
Management improvement helps to promote healthy development and open up emerging markets such as energy storage. 1) since 2021, more than half of the management staff of the company have been adjusted. After taking office, Chairman Cao Zhian has formulated a "three-step" strategy of "stable foundation, effective results and high level". The management improvement has achieved initial results. During the first half of 2022, the expense rate dropped to 9%. 2) the asset impairment and credit impairment are sufficient, and the future risk is small. 3) the company issued the stock appreciation right incentive plan at the end of 2020, the assessment target is based on the performance in 2020, and the compound growth rate of net profit in 2023 is not less than 40%. 4) expand new markets: compressed air energy storage, supercritical carbon dioxide boilers and other areas to make breakthroughs.
Profit forecast and rating: we expect the company's net profit in 2022-24 to be 2.22x6.15 / 1.62 billion yuan respectively. We give the company 15 times PE in 2023, corresponding to the target market capitalization of 9.2 billion yuan, which is 47% higher than the current market capitalization. It covers for the first time and gives a "buy" rating.
Risk tips: new thermal power installation is not as expected, pumped storage approval is not as expected, thermal power flexibility transformation demand is lower than expected, raw material costs remain high, international business risks.