Items:
Recently, China Energy Construction, the leading thermal power EPC company, disclosed its orders, signing new orders for traditional energy engineering construction business (mainly thermal power) in the first half of 2023, a year-on-year increase of 190.3 billion yuan. China can build on the thermal power EPC market share of more than 60%, the high increase in orders indicates that the thermal power industry boom in the future, equipment companies are expected to benefit simultaneously.
Guoxin Dianxin new point of view: 1) thermal power EPC boom, equipment enterprises are expected to benefit simultaneously; 2) from January to May 2023, new thermal power installed 22GW, year-on-year + 125%, thermal power industry off to a good start; 3) Dongfang Electric coal power equipment production and sales are booming, on the one hand, the product pricing power is enhanced, on the other hand, benefiting from the decline in raw material prices, profitability is expected to gradually increase. 4) maintain the company's profit forecast, and the estimated return net profit of the company from 2023 to 2025 is RMB 3.94 billion, a year-on-year growth rate of 38%, 34%, 20%, and diluted PE of 1.26, 1.70, 2.03, corresponding to 15.7, 11.6, and 9.7 times of the dynamic PE for 2023-2025, maintaining the "overweight" rating.
Comments:
Thermal power EPC is booming, and equipment enterprises are expected to benefit synchronously. China Energy Construction is the leading enterprise in traditional energy power construction, accounting for about 80% of domestic thermal power planning and design and about 60% of engineering construction.
2023H1, China can build thermal power-based traditional energy engineering construction business newly signed orders of 190.3 billion yuan, + 45% compared with the same period last year.
The National Energy Administration had previously predicted that the maximum power load in the summer of 2023 would increase by 92 million kilowatts from a year earlier to 1.36 billion kilowatts. Extreme weather also affects the output of new energy, aggravating the risk of power supply, lack of peak installation, coal power as the peak output of ballast stone, still need to speed up construction.
Dongfang Electric 2023Q1 signed a total of 22.6 billion yuan, + 26% compared with the same period last year. As one of the main equipment manufacturers of coal-fired units in China, the company has benefited from the high demand for new coal-fired power equipment, and the 2023Q1 clean and efficient energy equipment business has signed an order of 8.5 billion yuan, which is 101% higher than that of 2022Q4.
In 2023, the thermal power industry got off to a good start, and the company's performance achieved rapid growth from January to May 2023. From January to May 2023, thermal power installed 22GW was added nationwide, + 125% compared with the same period last year, of which coal-fired power installed 15GW was added, + 180% compared with the same period last year. Major power generation enterprises across the country completed thermal power investment of 25.8 billion yuan, + 12% year-on-year.
2023Q1 Dongfang Electric realized operating income of 14.43 billion yuan, year-on-year + 4%, month-on-month ratio-0.6%; realized return-to-mother net profit of 1.02 billion yuan, + 10% year-on-year, + 187% month-on-month; realized non-return net profit of 950 million yuan, + 44% year-on-year, and + 286% month-on-month.
2023Q1 Dongfang Electric realized a gross profit margin of 17.8%, year-on-year + 1.2pcts, month-on-month + 0.6pcts, net profit of 7.5%, year-on-year + 0.4pcts, month-on-month + 4.7pcts. In the context of energy supply and summer welcome, the company's coal and power equipment production and sales are booming, and the overall profitability has gradually improved.
The coal power business led to the high growth of the company's performance from 2023 to 2025, and the intensive delivery of pumped storage equipment opened the profit growth space after 2025. We expect that the national coal power plant will be newly installed with 50/70/82GW in 2023-2025, and the company is expected to benefit from the high demand for new thermal power equipment during the 14th five-year Plan period. After 2025, the pumped storage industry has entered a period of intensive delivery of equipment. As one of the duopolies of pumped storage equipment suppliers, the company is expected to open up room for profit growth.
Investment advice: maintain profit forecasts and maintain "overweight" ratings
To maintain the company's profit forecast, the company's net profit for 2023-2025 is expected to be 3.94x63.4 billion yuan, a year-on-year growth rate of 38%, 34% and 2.03%, respectively, corresponding to the 2023-2025 dynamic PE of 15.7, 11.6, and 9.7 times, maintaining the "overweight" rating.