The Zhitong Finance App learned that Guolian Securities released a research report saying that in the current context of large-scale installations of new energy sources and high demand for electricity, thermal power and nuclear power are ushered in a new round of construction cycle as important baseload power sources. After experiencing a wave of approval and commencement, 2024 is the equipment business performance implementation period. Industrial chain companies will benefit from increased investment, and this year is expected to usher in a performance realization period. Increased investment in power supplies drives profits for equipment vendors.

The main views of Guolian Securities are as follows:

Three logics support thermal power installations

1) Electricity demand. According to the National Energy Administration, the cumulative growth rate of electricity consumption in M1-M3 is 9.8%. In a situation where demand for electricity is boosted, the number of hours used for thermal power is expected to continue to be high. 2) The decline in coal prices and the improvement in thermal power plant costs. Assuming that the Q5500 coal price is reduced from 1,021 yuan/ton to 864 yuan/ton, the ignition price difference of thermal power companies will increase by 0.059 yuan/kWh. 3) Policy, the proportion of coal and electricity capacity recovery is gradually increasing, and the income of thermal power plants is increasing steadily. Electricity demand+falling coal prices+policy promotion jointly boosts enthusiasm for power plant installation.

2024 will be the peak period for thermal power equipment

The approved volume of thermal power for 2022/2023 was 68.5/72.2 GW, up 428.54%/5.37% year on year, respectively, and project approval remained high. From a construction perspective, the operating volume of thermal power in 2022/2023 was 66/124 GW, respectively, an increase of 34.1%/87.58% year-on-year, respectively. The thermal power construction cycle is generally about two years. Corresponding to the equipment revenue payout period in 2024, the League of Nations Securities calculated that the investment in thermal power equipment in 2024 was about 115.5 billion yuan, an increase of 58.42% over the previous year.

The high increase in installed nuclear power has greatly increased the amount of investment

As an important baseload power source, nuclear power is highly scarce. In 2022 and 2023, 10 units were approved. Nuclear power achieved long-term growth. In 2023, nuclear power achieved an investment of 94.9 billion yuan, and the cumulative total investment in nuclear power increased 20.8% year on year. From January to February 2024, nuclear power investment was 12.2 billion yuan, an increase of 39.5% year on year. High approval and high operating rate led to an increase in nuclear power investment.

In 2024, nuclear power equipment will enter an intensive delivery period

According to incomplete statistics from Guolian Securities, the operating volume of nuclear power in 2020-2023 was 5.4/6.2/5.0/6.2 GW, respectively. Judging from the approval and construction progress, the units approved in the second half of 2022 and the units approved in July 2023 are expected to start construction within 2024. Guolian Securities predicts that the 2024 start-up unit is expected to be close to 10.81 GW. The equipment side delivery period is 2 years after FCD. Guolian Securities predicts that the nuclear power equipment market will be about 56.5 billion yuan in 2024, an increase of 20.3% over the previous year.

Investment advice: Increased investment in power supplies drives profits for equipment vendors

1) Thermal power and nuclear power installations continue, and operator profits increase. It is recommended to focus on operators with increased installed capacity such as China Nuclear Power (601985.SH), Huaneng International (600011.SH), and Baoxin Energy (000690.SZ). 2) Power plant construction is speeding up, and 2024 is expected to usher in an equipment revenue payout period. It is recommended to focus on equipment vendors in the thermal power industry chain, such as Dongfang Electric (600875.SH). 3) The delivery period for nuclear power equipment is generally two years after FCD, and the 10 units approved in 2022 are expected to meet the equipment order fulfillment period. It is recommended to focus on equipment vendors in the nuclear power industry chain, such as Jiangsu Shentong (002438.SZ).

Risk warning: Coal prices fluctuate, policy promotion falls short of expectations, and power supply construction progress falls short of expectations.