Incidents:
According to the company's official WeChat account, on December 10, Longjing Environmental Protection and Huawei signed a strategic cooperation agreement in Shenzhen. The two sides will conduct in-depth cooperation in fields such as microgrids in mining areas and new energy power generation equipment.
Commentary:
Maintain the “Overweight” rating. The predicted net profit for the company for 2023-2025 was 1,364, 17.98, and 2,341 billion yuan, corresponding to EPS of 1.26, 1.67, and 2.17 yuan, and maintained the target price of 28.89 yuan.
Longjing and Huawei collaborated to develop microgrids and related new energy equipment businesses in mining areas. 1) The two sides will jointly innovate and develop industry-leading mining and metallurgy microgrid solutions to promote green mine construction. 2) The two sides regard each other as the core supplier, cooperate with each other in new energy equipment and services with their respective advantages, and prioritize each other's products and solutions under the same conditions. 3) Huawei Digital Energy supports Longjing's environmentally friendly batteries, PACK modules, and batteries through testing and improvement to match Huawei's digital energy product plans. It will cooperate with Longjing batteries and energy storage equipment in the mining and metallurgical microgrid project system.
The vast market space of the green power replacement market in mining areas in China is being opened at an accelerated pace. 1) On the one hand, the carbon emissions of China's mining industry are large and still increasing; on the other hand, carbon trading and carbon tariffs continue to stimulate the mining industry's demand for emission reduction. 2) The total electricity consumption of the mining industry reached 268.2 billion kilowatt-hours in 2022. 3) Estimate the green power market space in China's mines: ① Key assumptions: the mining industry rate is 5% of green electricity replacement ratio in 2023, and will increase by 5% every year thereafter, to 40% by 2030; assuming that the replacement is mainly distributed photovoltaics, the price of green electricity is 0.3 yuan/kilowatt-hour, the annual utilization time of distributed photovoltaics is 1,200 hours, and the unit investment in distributed photovoltaics EPC is 2.50 yuan/W in 2023, and the unit investment will decrease by 5% every year until 2030; the energy storage system assumes a 10% storage scale, 2 hours of electrochemical energy storage; energy storage system EPC The unit investment is 1 yuan/Wh in 2023, and the unit investment will decrease by 5% per year until 2030. ② According to the above assumptions, in 2024, the entire industry will have a green power operating market space of 8.4 billion/year (green power replacement ratio of 10%); by 2030, the entire industry will have a green power operating market space of 39.2 billion/year (green power replacement ratio of 40%).
The 2024-2030 mining green power EPC market is expected to have about 28 billion dollars of distributed photovoltaics and about 2.3 billion EPC investment space for energy storage systems every year. If microgrids are considered, the investment scale will be even larger.
The new energy business is advancing rapidly, collaborating with the mining green energy overall solution business. 1) In terms of scenery, the company has now completed the index registration and the projects under construction are 2 GW and 1 GW, respectively. 2) In terms of energy storage: ① The Longjing Honeycomb project was completed and put into operation on August 28, 2023, and the new energy storage contract has reached 1,235 billion yuan; ② the Shanghang project is about to be put into production. 3) On the one hand, the above business is supported by Zijin's majority shareholders, and on the other hand, it cooperates with Huawei to jointly develop overall mining green energy solutions to provide market application scenarios. Even under a tough competitive pattern, profitability remains worry-free.
Risk warning: Flue gas equipment sales, solid and hazardous waste project management, new energy business expansion falling short of expectations, etc.