Key points of investment:
It is one of the two giants of nuclear power and continues to expand new energy. The company is backed by CNNC, and the controlling shareholder has a complete nuclear technology industry system to provide strong backing for the company's development. The company has a clear industrial layout, with nuclear energy as its main business, vigorously explores the new energy market (acquires CNNC Energy to enter new energy in 20 years), and actively explores strategic emerging industries. The company's revenue structure is dominated by nuclear power, accounting for 86.61% of the revenue in the power sector in 23; new energy revenue showed a rapid growth trend, with a CAGR of 204% in 18-23. It is expected that profits will increase in the future as equipment depreciation expires, and short-term fluctuations in uranium prices will have limited impact on the company's production costs. The company's revenue grew well, and its performance continued to grow. Net profit to mother increased 17.91% year-on-year in '23. Profit margins have been rising steadily, and profitability has continued to grow. The gross profit margin and net interest rate for 1Q24 were 49.17% and 31.38% respectively, up 4.55 pct and 3.00 pct respectively from '23.
The normal approval of nuclear power opens up room for long-term growth and actively explores new fields of comprehensive utilization of nuclear energy. China's nuclear share is only about 5%, and is expected to reach about 10% in 35 years. China's nuclear power installations are expected to increase steadily. CNNC ranks first with approved units under construction. As the only listed power operation platform under the Group, the company is expected to usher in a period of expansion. It is expected that an additional 1.21/1.21/1.39/6.32 GW of nuclear power will be put into operation in 24-27, of which 27 will be the big year of production. The amount of electricity feed-in to nuclear power has increased steadily, and market-based transactions are expected to fluctuate limited in 24 years.
Furthermore, the company actively explores the comprehensive utilization of nuclear energy to cultivate new performance growth points. On the one hand, the fourth generation of high-temperature air-cooled reactors is expected to be the first to usher in the commercial era. The high temperature reactor technology was jointly developed by CNNC and Tsinghua University. CNNC and Tsinghua University are the creators, promoters and owners of all intellectual property rights. The company will assume an important responsibility in the subsequent promotion and application of high-temperature air-cooled reactor technology. On the other hand, “Linglong 1” is expected to be put into operation in 26 years. The small reactor plays an important role in heating, hydrogen production, and seawater desalination.
Scenery has entered the fast track of development and accelerated the incubation of agile projects. Since the acquisition of CNNC Huineng in 2020, the company's installed capacity has grown rapidly. By the end of '23, the company's New Energy Holdings was operating 18.52 GW of installed capacity (5.95 GW of wind power and 12.56 GW of photovoltaics). As of 1Q24, 3.34 GW of wind power and 10.92 GW of photovoltaics were under construction. New energy has entered the fast track, and the company has accelerated the implementation of the 14th Five-Year Plan target (planned target of 30 GW). It is expected that the company's gross profit will show a rapid growth trend driven by installed capacity. In addition, the company accelerated the incubation of agile projects, established a perovskite company, introduced a research team, and approved the pilot research project.
Profit forecast and investment advice: We forecast that the company's revenue for 24-26 will be 798.75, 866.63 billion yuan, and 93.782 billion yuan, respectively, and net profit to mother will be 114.64, 124.11, and 13.455 billion yuan, respectively. The corresponding PE is 16.9/15.6/14.4 times, respectively. Based on comparable company conditions, using PE valuation, we gave a valuation of 18.0 times in 2024, corresponding to a market value of 206.343 billion yuan, and a target price of 10.93 yuan for the company.
Covered for the first time, giving a “holding” rating.
Risk warning: Risk of project construction falling short of expectations; policy risk; risk of nuclear power safety accidents; risk of information delays or untimely updates of public data used in research reports.