At the end of the year, the Jinqimen and Taipingling nuclear power plants were approved. According to Xinhua News Agency, on December 29, 2023, the executive meeting of the State Council decided to approve units 1 and 2 of the Jinqimen Nuclear Power Project and units 3 and 4 of the Taipingling Nuclear Power Plant Phase II Project. Nuclear power has the characteristics of being environmentally friendly and highly economical, and is an excellent baseload energy source in the context of carbon neutrality. The company is one of the main suppliers of nuclear power ball valves, butterfly valves, etc., and is expected to benefit from the approval of nuclear power units. We maintain our previous profit forecast. We expect the company's net profit to be 2.9/3.9/50 billion yuan in 2023-2025, respectively, corresponding to 20, 15, and 12 times PE. Comparatively, the company Wind unanimously expected the average PE value to be 18 times. Considering the company's strengthened advantages in the nuclear power sector and the expansion of new fields such as hydrogen energy, the company was given 20 times PE in 24 years, with a target price of 15.4 yuan (previous value of 14.5 yuan), maintaining a “buy” rating.
In 23, 10 new nuclear power units were approved, corresponding to the company's potential valve orders of 700 million yuan. China resumed nuclear power approval after 2019. Of these, 10 units were approved in 2022, and a total of 6 units were approved at the Xudabao, Shidaowan, and Ningde nuclear power plants in July 2023. In addition to the Jinqimen and Taipingling nuclear power plants approved this time, 10 nuclear power units were approved for approval throughout 2023. According to the records of the company's investor research meeting on November 23, 2023, the company's current annual production capacity of nuclear power valves can meet the delivery of 6 to 8 relevant valves required for new nuclear power units every year. After the upgrading and demolition and renovation of old plants is completed, it is expected to increase the production capacity of 2 to 4 valves required for newly built units, which can meet market demand in the short term. The company is one of the main suppliers of nuclear grade butterfly valves and ball valves in China's nuclear power unit construction projects. The order amount that can be obtained for a single nuclear power unit is around 70 million.
The short-term impact of asset transfers in the nuclear power business has been eliminated. The Q4 performance is expected to improve the company's revenue and profit growth in the first three quarters lower than our expectations for the company's annual growth rate. It is speculated that delivery of nuclear power-related businesses has lagged behind. On October 25, the company announced that it plans to transfer assets and business related to the nuclear power military division to Shentong Nuclear Energy, a wholly-owned subsidiary, or caused a slight slowdown in the pace of revenue recognition. Q4 With the completion of the business transfer, the company's overall revenue is expected to return to a rapid growth trajectory.
Risk warning: 1) Increased competition; 2) Fluctuations in freight/raw material prices; 3) Demand for nuclear power/metallurgy falls short of expectations.