Regional water conservancy and hydropower investment and construction integration leader, power generation business to create a new growth point. The company is the only engineering enterprise with special qualification for general contracting of water conservancy and hydropower projects in Guangdong area for many years, with rich engineering construction experience and strong brand influence in the region. The company adheres to the development of the dual main industries of engineering construction and clean energy investment. In the past three years, the revenue compound growth rate of clean energy power generation business has reached 30.7%, and the gross profit has exceeded 65%, which has become an important driving force for the company's high-quality development.
Project construction: the policy strongly supports the construction of water conservancy infrastructure, and the potential of pumped storage power station and rail transit is considerable.
The policy has paid more attention to the construction of water conservancy projects. Of the 55 major water conservancy projects deployed and promoted by the state in 2022, 18 have started in the first half of the year, and major projects are expected to enter a centralized construction period in the second half of the year as the weather turns cooler and the epidemic situation is stable. Guangdong Province plans to invest 405 billion yuan in water conservancy during the 14th five-year Plan period, a substantial increase of 117 percent over the 13th five-year Plan. At the same time, the demand for energy storage accelerates the construction of pumped storage power stations, the development of Guangdong-Hong Kong-Macau Greater Bay Area urban agglomeration drives the demand for rail transit construction in the region, and the company's professional technology is mature and has undertaken a series of major water conservancy and hydropower projects. with rich construction experience in the field of pumped storage power station and urban rail transit, it is expected to continue to benefit from the continuous strengthening of infrastructure investment.
Clean energy power generation: the cost of wind power generation continues to decline, the utilization rate increases significantly, and the installed space is released again.
It is estimated that the new installed capacity of wind power and photovoltaic will grow at a compound growth rate of 13.8% and 16.7% respectively during the 14th five-year Plan period. With the large-scale wind turbines and the expansion of the capacity of wind power photovoltaic modules, the installed cost of wind power still has the potential to continue to decline. In 2020, the wind power and photovoltaic warning in Xinjiang changed from red to orange, and the wind / light abandonment rate decreased from 38% in 2016 to 6.2% in 2020, and the installed space was released again. The company's clean energy power generation project is built on its own, with outstanding construction cost advantages, the company explores new energy power generation project cooperation opportunities with local governments, the framework agreement in hand involves the installation scale exceeding 10GW, and with the continuous progress of project approval and feasibility research, the company is expected to land a large number of new energy power generation projects in the next 1-2 years.
Investment suggestion: solid local customer resources and rich project experience create a brand moat in the company's engineering field, and it is expected that the influence of the company's engineering business brand will be further consolidated in the future; the company has rich reserves of clean energy power generation projects, and the western region will increase its consumption capacity to release new installation space, and the scale of power generation business is expected to expand rapidly in the future. It is predicted that the company's revenue growth in 2022-2024 will be 13.24%, 9.96%, 9.08%, and net profit growth will be 22.7%, 18.8%, 14.7%, 0.33, 0.40, and 0.46 yuan, respectively, with a price-to-earnings ratio of 22.8, 18.8 and 16.4. The relative valuation method estimates a reasonable valuation of 8.01-9.52 yuan in 2023, covering it for the first time and giving a "overweight" rating.
Risk hints: infrastructure investment is not as expected, clean energy power generation policy adjustment, power generation project framework agreement landing is not as expected, competition in the construction industry is intensified, power generation project framework agreement landing is not as expected, the risk of relatively concentrated operating area, rising financing costs, restructuring and increasing the risk of failure.