It began with the “15 Plan” and is one of the largest state-owned energy equipment manufacturing enterprises in China.
Harbin Electric Co., Ltd. is one of the largest manufacturers of power generation equipment in China managed by the State Council's State-owned Assets Administration Commission. The company's main products include industrial products such as coal power, hydropower, nuclear power, gas and power mainframe equipment, clean energy equipment, and ship power equipment. In addition, the company also provides services such as general contracting of power plant engineering and export of power plant products. The company's main coal power equipment accounts for 1/3 of the country's installed capacity, large hydropower products account for more than 1/2 of the total domestic installed capacity, and nuclear power mainframe equipment accounts for 1/3 of the total domestic installed capacity.
New energy installations are rising rapidly, and thermal power supports energy security and supply security.
In terms of energy generation and installed capacity, China's thermal power accounts for 47.6% of the total installed capacity of wind power and solar power in 2023. The share of new energy installed capacity is rising rapidly, but coal power is still the core of power generation in China. In 2023, the share of coal power generation was 63%, an increase of about 5 percentage points over the previous year. In order to ensure that electricity supply needs are met and to enhance the safety of power systems, coal power construction still needs to be guaranteed. According to the State Grid Energy Institute, the installed capacity of thermal power is estimated to be 1.45 billion kilowatts in 2024, an increase of 4.3% over the previous year, with an additional installed capacity of about 60 million kilowatts. It is predicted that by 2030, the installed capacity of thermal power will reach 1.61 billion kilowatts, and thermal power will still be the main power supplier.
Coal and electricity orders create performance growth, and flexibility transformation and savings support long-term development.
The company is one of the three providers of coal and power mainframe equipment. The industry pattern is stable, and it is expected that the company will benefit from the increase in industry sentiment. In 2023, the company added 13.97 billion yuan in coal and electricity orders, an increase of 101.6% over the previous year. After the company consumes early low-price orders, the revenue of the coal and power business is expected to increase. The thermal power flexibility transformation responds to the goal of changing fluctuations in the power system through upgrades on the energy equipment side. As the main provider of coal power equipment, the company is expected to meet related demand in the future; the “Pumped Energy Storage Development Master Plan” plans to reach 120 million kilowatts of pumped energy storage by 2030, and the total production of pumped energy storage in China will be 51.4 million kilowatts in 2023. According to the plan, the company is expected to start producing 9.43 million kilowatts per year. As the only large-scale hydropower mainframe equipment provider in the country, the company will benefit from the increase in related demand.
For the first time, it was covered and given a purchase rating. The target price of HK$3.20 predicts that the company's net profit for 2024-2026 would be $9.5 billion, 13.9 billion, and 1.68 billion, respectively, corresponding increases of 64.9%, 46.2%, and 21.3%, and the three-year compound growth rate of net profit to mother would be 42.5%. After considering risk factors, the company was given a target valuation of 7.0 times PE (2024E), 0.5 times PB (TTM), and the corresponding share price was about HK$3.20. The expected room for stock price increase was 24.0%, giving it a “buy” rating.