Introduction to this report:
The company will officially switch from two-wheel drive to three-wheel drive (screw compressors, geothermal power plant operation, EPC construction). The performance is extremely flexible, increasing net profit from 2021-22 to 500 million and 670 million.
Key points of investment:
Conclusion: The company has received an advance payment of 10 million US dollars (letter of credit) for the 65 million US dollar geothermal module power plant EPC project in Kenya, indicating that the project will commence construction. It is expected to be completed before the end of 2021, which will greatly enhance the 2021-22 performance. The 2020 EPS was maintained at 0.31 yuan, and the 2021-22 EPS was raised to 0.59 (+0.14) and 0.78 (+0.17) yuan. The large EPS order progressed smoothly, indicating that the company successfully entered the self-operation, project construction, and screw compressor three-wheel drive stages. Considering the continuity of EPC project orders, maintain the target price of 30.83 yuan and increase holdings.
The Kenyan EPC order has received 10 million advance payments, which will greatly enhance 2021-22 performance. On August 20, KRED, a subsidiary of Kaishan Geothermal Development, received an advance payment of 10 million US dollars (letter of credit) for the Kenyan EPC order signed in April 2019. It is expected that the project will commence, and within 90 days of the notice of commencement of construction, the customer will remit another 3 million US dollars in advance payment, and the remaining purchase price will be paid within 3 months after COD. The project is a 35 MW geothermal module power plant with a total price of 65 million US dollars. Revenue can be confirmed after the equipment leaves customs, and construction is confirmed according to the completion percentage. The construction period is 15 months, that is, it is expected to be completed before the end of 2021. Project margins are high, and revenue is expected to be confirmed in 2021-22.
The construction space for geothermal power plants is huge, and the three-wheel drive performance is extremely flexible. The first SMGP 45MW project has been approved by international institutions such as the AIIB. The refinancing path is smooth, and the scale of self-operation is expected to reach GW level. Wellhead modular power plants lower the investment threshold for geothermal power generation and lower electricity costs. The market space for power plant construction is huge. Based on a global annual increase of 500 MW, corresponding to a market of 20-30 billion US dollars. Furthermore, the overseas business of screw compressors, which is the main business, has expanded rapidly, and its performance is more flexible after crossing the break-even point.
Catalysts: acquisition of geothermal resources, high quality of geothermal well resources, subsequent EPC orders Risk factors: repeated overseas epidemics have delayed power plant development progress; subsequent financing falls short of expectations
