Maintain the “Overweight” rating: Maintain EPS of 0.25/0.26/0.28 yuan from 2024 to 2026. Based on the comparable company's PE valuation situation, considering the company's long-term continuous growth and the scarcity of nuclear power in H shares, the company was given 14 times PE in 2025, and the target price was raised to HK$4.06 to maintain the “gain” rating.
Incident: The company issued the “Plan to Issue A Shares Convertible Corporate Bonds to Unspecified Targets”, and plans to issue A-share convertible corporate bonds totaling no more than RMB 4.9 billion (including capital) to unspecified targets.
The target project is profitable, and the issuance of convertible bonds helps relieve financial pressure. The capital raised this time is mainly used for the Guangdong Lufeng Nuclear Power Plant Unit 5 and 6 projects (construction started in September 2022 and August 2023, respectively, and is expected to be put into operation in 2027 and 2028). We believe that the profit level of the project to be funded is impressive; according to the company's feasibility analysis report on the use of capital raised this time: based on the calculation of the construction period of 58 months, an interval of 10 months between the two units, and a 30-year economic calculation period during operation, the IRR capital of the Lufeng Unit 5 and 6 projects is expected to reach 9% without changes in various calculation parameters. According to the company's announcement: 1) The planned capital expenditure for 2024 was 30.59 billion yuan, compared with the capital expenditure in 2023; 2) Net operating cash flow in 2023 was 33.12 billion yuan, +1.75 billion yuan compared to the previous year. In the context of simultaneous construction of multiple units, the scale of the company's capital expenditure is still expanding; issuing convertible bonds can help relieve the company's financial pressure and lay the foundation for sustainable growth.
Projects under construction are progressing in an orderly manner, and long-term growth continues to be considerable. As of the end of May 2024, the company had an installed capacity of 31.8 GW; managed 10 approved and under construction units, with a total installed capacity of 7.2 GW. According to the progress of the company's ongoing projects, the company's nuclear power installations grew steadily from 2025 to 2028 (an average of 1 to 2 units are put into operation every year). At the same time, considering that nuclear power has entered the normalization approval stage (5/10/10 nuclear power units were approved from 2021 to 2023, respectively), we believe that there is still room for improvement in the company's reserve and installed capacity, and the growth is sustainable.
Risk warning: The progress of nuclear power projects is slower than expected, the price of nuclear power is lower than expected, the number of hours used falls short of expectations, the cost of nuclear fuel exceeds expectations, the risk of failure to issue convertible bonds, etc.