Nuclear power production is gradually speeding up, and target prices are being raised
China Nuclear Power's 2Q24 nuclear power output rebounded year-on-month, and the amount of new energy continued to grow at a high rate. Refer to the 2Q24 operating data changes and lower the gross profit margin; the issuance of similar REITs reduces the debt ratio and lowers the financial expense ratio.
We expect the company's net profit to be 11.1/11.6/12.5 billion yuan in 2024-2026 (previous value: 11.7/12.8/13.4 billion yuan), and EPS of 0.59/0.61/0.66 yuan, respectively. Comparable companies unanimously expected 18 times the average PE for 2024. Considering the gradual acceleration of production of the company's new nuclear power units and the medium- to long-term value is expected to be revalued, the company was given 21 times PE in 2024, with a target price of 12.39 yuan (previous value of 10.54 yuan). Maintain a “buy” rating.
Nuclear power: 2Q24 power generation showed an average year-on-month recovery, and production gradually accelerated in 2024-2027. By the end of June 24, the company had 25 nuclear power carriers, with an installed capacity of 23.75 GW, 1Q24/2Q24 achieved a power generation capacity of 43.7/45.5 billion kilowatt-hours (-3.1%/+0.7% YoY), the average utilization time was 1,839/1,915 hours; 2Q24 Sanmen/Fuqing nuclear power plant overhauls and power generation decreased 13.7%/4.8% year on year. The number of times and days decreased year on year, and power generation increased by 17.2% year on year. New nuclear power units are progressing in an orderly manner. By the end of July '24, the company had a total of 12 machines under construction, with an installed capacity of 13.92 GW; 3 units to be built had been approved, with an installed capacity of 3.64 GW; the company's nuclear power capacity under construction and to be built was equivalent to 74% of the operating capacity. The construction cycle of nuclear power projects is long. In 2024-2027, the company's nuclear power production will gradually accelerate. We expect 1.21/1.21/1.39/6.32 GW.
New energy: 2Q24 power generation continued to grow at a high rate. As of the end of June '24, green power REITs had active assets of 22.37 GW of installed energy (14.81 GW+ 7.56 GW of wind power) and 14.72 GW of installed energy (11.47 GW of photovoltaics and 3.25 GW of wind power) under construction. With prices in the upstream PV industry chain falling sharply, we are optimistic about the scale of the company's installed capacity to be put into production in 24.
1Q24/2Q24 new energy generation reached 7.4/8.7 billion kilowatt-hours (+61%/+47% year over year), thanks to an increase in installed capacity. CNNC Huineng Green Power's consolidated REITs were issued on June 25, raised 7.136 billion yuan, issued at an interest rate of 2.46%, and a total installed capacity of 1.12 GW of underlying assets. We believe it is expected to reduce the company's balance ratio and revitalize existing assets.
Cash flow: Proposed capital increases to address the capital gap. Capital expenditure is expected to gradually peak. The company plans to raise no more than 14 billion yuan in additional capital for the construction of nuclear power projects such as Xudabao/Zhangzhou/Tianwan, which is expected to fill the capital gap for the company's nuclear power projects. The issuance price is 8.52 yuan/share, corresponding to the number of shares issued at no more than 1.643 billion yuan, an increase of 8.7% over the company's share capital at the end of June. Referring to the company's investment progress in nuclear power and green power projects, we expect the company's capital expenditure to gradually peak in 2024-2025; even considering the continued commencement of the company's potential new units, we expect the company's FCFF/FCFE to be corrected in 2028-2030.
Risk warning: the number of nuclear power approvals falls short of expectations; the commissioning of projects falls short of expectations; the risk of electricity prices falling.