Shanghai Electric is one of the largest comprehensive equipment manufacturing enterprise groups in China, focusing on the three major fields of energy equipment, industrial equipment, and integrated services. It is committed to achieving three transformations, namely speeding up the transformation from traditional energy equipment to efficient clean energy equipment, speeding up the transformation from traditional manufacturing to intelligent manufacturing, and accelerating the transformation from single manufacturing to a “manufacturing+service” model. The company is leading in many business industries, and is in a leading position in the field of traditional thermal power and nuclear power equipment. Its performance in the wind power field is impressive. The offshore wind power market has the highest share, and Shanghai Mitsubishi is in the first tier in the elevator industry.
With the clean transformation of traditional energy equipment, the wind power business has flourished. The share of clean energy in China has steadily increased, the installed structure of power generation has been further optimized, and the installed capacity growth rate of thermal power and nuclear power has slowed in 2019.
The wind power market is developing rapidly. In 2019, 25.74 GW of domestic wind power was installed, +21% over the same period last year. Affected by changes in offshore wind power policy, a large number of approved projects are poised to be launched. China's offshore wind power may usher in a wave of rush to be installed and connected to the grid before the end of 2021. The company has the highest domestic market share in the offshore wind power sector. As of the end of 2018, the company's cumulative offshore wind power installed capacity accounted for 51%. In 2019, orders for wind power equipment were added at 22.38 billion yuan, an increase of 72.2% over the previous year, and the performance was impressive. In-hand wind power equipment orders were RMB 29.81 billion, an increase of 49.8% over the previous year, and continued growth is guaranteed. The wind power business is to be spun off and listed on the Science and Technology Innovation Board, which is conducive to improving financing efficiency and enhancing the profitability and market competitiveness of electric wind power.
Lay out lithium battery energy storage, upgrade the high-end equipment industry, and promote the digitization and informatization of energy and industrial development through industrial Internet platforms. The company and Guoxuan Hi-Tech jointly established Electric Guoxuan in 2017 to enter the energy storage field. In November 2019, the company completed the acquisition of Yinghe Technology, perfected the company's strategic layout in the field of new energy, and exploited the synergistic effects of power supply+energy storage+power grid. The company's industrial internet platform started by gathering its own advantageous businesses such as wind power and elevators, and gradually moved towards an open market ecosystem. Establishing an automation group industrial cluster, building the layout of the entire intelligent manufacturing industry chain, and improving the quality and efficiency of “intelligent manufacturing+service” will bring new momentum for growth.
Profit forecasting, valuation and ratings: We maintain profit forecasts and predict that the company's net profit for the year 2020 to 22 will be 40.12/44.68/4.929 billion yuan, the corresponding EPS will be 0.26/0.29/0.33 yuan, and Shanghai Electric (A/H)'s current stock price corresponding to 20-year PE will be 20/8 times. As a leading domestic manufacturer of energy equipment (especially offshore wind power) and industrial equipment, the company is expected to use its leading advantages to further increase its market share in the context of China's energy structure transformation and industrial restructuring; the spin-off listing of electric wind power broadens financing channels, which is expected to raise the company's valuation level and raise it to a “buy” rating.
Risk warning: There is uncertainty about whether electric and wind power can be successfully listed; macroeconomic risks brought about by factors such as the COVID-19 pandemic; overseas business risks brought about by geopolitical and other factors; risk of exchange rate fluctuations, etc.