Main points of investment
Event: on June 7, 2018, the company announced that 147 million shares were issued at a price of 7.28 yuan per share, raising 1.071 billion yuan for the 50, 000 kilowatt photothermal power generation project of the Zhengjiashawo molten salt tower in Yumen. Among them, Shanghai Electric subscribed for 591 million yuan at 7.30 yuan per share. After the completion of the subscription, Shanghai Electric holds a 9.19% stake in Tianwo Technology, making it the company's second largest shareholder.
Acquire and increase capital of Yumen Xinneng to enter the emerging photothermal power industry: on June 23, 2017, the company completed the acquisition of 85% of the equity of Yumen Xinneng first Electric Power Co., Ltd. The Yumen photothermal project is expected to be completed within this year, with a total investment of 1.79 billion yuan. The project is the world's first commercial tower power station based on secondary reflection, with an estimated annual power generation capacity of 216 million kilowatt hours and sales revenue of 248 million yuan, according to the website of the Jiuquan Municipal people's Government.
Photothermal power generation is another form of solar power generation different from photovoltaic power generation. China's 13th five-year plan for solar and thermal power installation will reach 5GW, with a market size of about 150 billion yuan. The first batch of 20 demonstration projects were launched in 2016, and those completed and put into production by the end of the 18th can implement a benchmarking price of 1.15 yuan per kilowatt-hour. Photothermal power generation has the advantages of low energy storage cost, peak regulation to achieve continuous power generation and other advantages. After the related technology is mature, photothermal power generation has a broad development prospect.
Power engineering EPC business orders are full, trying to build a world-class integrated service provider of power engineering, new energy and clean energy: according to the 2017 annual report, as of the end of March 2018, the company had orders on hand of 18.967 billion yuan, an increase of 1.84% over last year. Of this total, 16.275 billion yuan was for business orders for power engineering and clean energy engineering, 2.343 billion yuan for pressure vessel manufacturing, and 349 million yuan for marine and military engineering and other business orders. The company expects the range of net profit from January to June 2018 to be 0.8-120 million yuan, an increase of-11.7% to 32.5% over the same period last year. The company's traditional power engineering and other business operations are normal, and the performance remains basically stable.
Investment suggestion: we predict that the company's earnings per share from 2018 to 2020 will be 0.30 yuan, 0.42 yuan and 0.52 yuan respectively. The return on equity is 8.40%, 10.70% and 11.6% respectively, covering it for the first time and giving it an investment rating of "overweight-A".
Risk tips: the demand of traditional EPC business is declining, the execution of orders is not as expected, and the revenue of photothermal projects is lower than expected.
