Taishan Nuclear Power has been restarted, and factors suppressing performance have been eliminated; new units have been put into operation one after another, and the company can be expected to grow for a long time.
First coverage, giving an “increase in wealth” investment rating.
It is a scarce pure nuclear power operator, and its leading position in the industry is stable. The company is the only nuclear power generation platform under the CGN Group. The group covers the upstream and downstream nuclear power industry chain, and the synergy effect is obvious. As the units were put into operation one after another, the company's revenue and performance grew steadily. In 2018-2023, the compound growth rate of the company's revenue reached 10.2%, and the compound growth rate of net profit to mother reached 4.3%. The company's debt ratio continues to decline and has now fallen to around 60%; operating cash flow is abundant, which can provide good support for new aircraft.
Nuclear power approval has become normalized, and there is plenty of room for installed capacity growth. In terms of installed capacity and electricity capacity, since 2019, China's nuclear power approval has been accelerated, and 10 new approved units will be added in 2022 and 2023; according to the plan, China's nuclear power generation will account for 10% in 2035, and only 4.86% in 2023. There is still room for double growth, and nuclear power is expected to maintain a high level of approval. In terms of electricity prices, although the proportion of market-based nuclear power transactions has continued to rise in recent years, all regions basically have certain recycling mechanisms. The final settlement price of electricity is close to the approved electricity price, so the price of nuclear power is relatively stable. In terms of cost, fuel costs account for about 20% to 30% of nuclear power operating costs, of which natural uranium accounts for nearly half. The price of natural uranium has risen sharply since 2023, but major nuclear power companies have stabilized fuel prices through long-term cooperation, and the overall cost has been limited.
At the same time, as technology continues to mature, the cost of third-generation nuclear power is expected to decrease, thereby increasing the yield of the project.
Performance suppression factors have been eliminated, and the company's valuation needs to be further repaired. The company's Taishan Unit 1 was reconnected to the grid in November 2023. With Taishan Nuclear Power's grid-connected power generation, factors suppressing the company's performance are eliminated, and power generation and profit are expected to increase further year-on-year. By the end of 2023, the company had 11 units under construction and approved for construction, of which Fangchenggang Unit 4 was put into operation on May 25, 2024. As subsequent units are gradually put into operation, the company can be expected to grow for a long time. Since listing, the company's dividend ratio and dividend rate have shown an upward trend. They were 44.3% and 3.0% respectively in 2023, and according to the company's shareholder return plan, the dividend ratio will continue to grow in 2021-2025. The nuclear power business model is similar to hydropower, and profits after the depreciation period ends ushered in a period of steady release. Currently, the overall valuation of the nuclear power industry is lower than hydropower, and there is a lot of room for restoration.
Profit forecasting and valuation. Taishan Nuclear Power has been restarted, and factors suppressing performance have been eliminated; new units have been put into operation one after another, and the company can be expected to grow for a long time. The company's net profit for 2024-2026 is estimated to be 116.36, 123.35, and 13.67 billion yuan, respectively, up 8.5%, 6.0%, and 10.8% year-on-year; PE corresponding to the current stock price is 18.8x, 17.8x, and 16.0x. First coverage, giving an “increase in wealth” investment rating.
Risk warning: Risk of safe and stable operation of nuclear power plants, approval progress falling short of expectations, project construction falling short of expectations, risk of falling electricity prices, etc.